Penn Virginia Reports Second Quarter 2020 Results
Penn Virginia Corporation (NASDAQ:PVAC) reported its second quarter 2020 financial and operational results, highlighting a net cash provided by operating activities of $56.4 million and a free cash flow of $6.6 million. The company produced 18,888 BOPD and 24,617 BOEPD, achieving a realized oil price of $23.97 per barrel, or $50.37 including hedge settlements. Despite a net loss of $94.7 million due to impairments and unrealized losses, adjusted net income was $19.6 million, or $1.29 per diluted share. Proved reserves totaled 123.1 MMBOE, with a PV-10 value of $967.9 million as of August 1, 2020.
- Generated $56.4 million in net cash provided by operating activities.
- Achieved free cash flow of $6.6 million for Q2 2020.
- Produced 18,888 barrels of oil per day.
- Realized an oil price of $50.37 per barrel after hedge settlements.
- Adjusted net income of $19.6 million for Q2 2020.
- Reported a net loss of $94.7 million, including a $35.5 million impairment.
- Adjusted EBITDAX decreased to $66.4 million, down from $86.7 million year-over-year.
- Net debt to LTM Adjusted EBITDAX ratio at approximately 1.65x.
HOUSTON, Aug. 06, 2020 (GLOBE NEWSWIRE) -- Penn Virginia Corporation ("Penn Virginia" or the "Company") (NASDAQ:PVAC) today announced its financial and operational results for the second quarter 2020.
Recent Significant Highlights
- Generated net cash provided by operating activities of
$56.4 million and free cash flow ("FCF")(1) of$6.6 million for the second quarter of 2020 and expects to generate significant FCF(1) for 2020; - Produced 18,888 barrels of oil per day ("BOPD") and 24,617 barrels of oil equivalent per day ("BOEPD") for the second quarter of 2020;
- Realized oil price for the second quarter of 2020 of
$23.97 per barrel and$50.37 per barrel including hedge settlements; - Reported net loss of
$94.7 million (includes a non-cash impairment of oil and gas properties of$35.5 million and non-cash unrealized losses on derivatives of$79.6 million ), or$6.24 per share, and adjusted net income(2) of$19.6 million , or$1.29 per diluted share, for the second quarter of 2020; - Generated adjusted EBITDAX(3) of
$66.4 million for the second quarter of 2020; - Reduced accounts payable by approximately
$45 million in the second quarter of 2020; - Estimated proved reserves were 123.1 million barrels of oil equivalent ("MMBOE") with a standardized measure of
$936.8 million and an SEC PV-10 value(4) of$967.9 million as of August 1, 2020; - Estimated proved developed reserves were 54.7 MMBOE with a standardized measure of
$705.6 million and PV-10 value(4) of$708.7 million at SEC pricing and$726.0 million (at strip pricing as of August 5, 2020 – see Appendix); and - Recorded a mark-to-market value of the Company's commodity hedge position of approximately
$32 million as of August 5, 2020.
"Our second quarter results represent another outstanding achievement for Penn Virginia," said John A. Brooks, President and Chief Executive Officer of Penn Virginia. "We posted strong realized pricing in part due to our ability to store production. This storage provided us the option to delay selling our production until prices had recovered from their record lows. Our realized hedge book gains also contributed significantly to our high realized price of over
Mr. Brooks added, "Looking ahead, we expect to generate positive free cash flow for the remainder of the year and plan to use that free cash flow to continue to reduce debt. We will remain focused on capital discipline, preservation of our strong balance sheet, and cash on cash returns."
Second Quarter 2020 Operating Results
Total production for the second quarter of 2020 was 2.24 MMBOE, or 24,617 BOEPD (
Second Quarter 2020 Financial Results
Operating expenses were
Net loss for the second quarter of 2020 was
Adjusted EBITDAX(3) was
During the second quarter of 2020, the Company incurred
As of June 30, 2020, the Company had a net debt to LTM Adjusted EBITDAX ratio of approximately 1.65x(6).
Acreage
As of June 30, 2020, the Company had approximately 99,000 gross (86,500 net) acres. Approximately
Proved Reserves
As of August 1, 2020, Penn Virginia's total proved reserves were approximately 123.1 MMBOE, of which 54.7 MMBOE were proved developed ("PD") reserves. The proved reserves were calculated in accordance with the Securities and Exchange Commission ("SEC") guidelines using the first day of the month prices for the last 12 months, resulting in pricing of
The Company's standardized measure of total proved reserves was
The PV-10 value(4) of the Company's PD reserves utilizing the SEC price guidelines was
As of August 1, 2020, Penn Virginia had cash of
Outlook
The table below sets forth the Company's operational and financial guidance:
| 3Q 2020 | ||
| Production (BOPD) | 17,000 – 19,000 | |
| Capital Expenditures (millions) | | |
Guidance reflects completion of the Company’s five remaining drilled uncompleted ("DUC") wells during the third quarter of 2020.
Second Quarter 2020 Conference Call
A conference call and webcast discussing second quarter 2020 financial and operational results is scheduled for Friday, August 7, 2020 at 10:00 a.m. ET. Prepared remarks will be followed by a question and answer period. Investors and analysts may participate via phone by dialing (844) 707-6931 (international: (412) 317-9248) five to 10 minutes before the scheduled start time, or via webcast by logging on to the Company's website, www.pennvirginia.com, at least 15 minutes before the scheduled start time to download supporting materials and install audio software, as necessary. The webcast can also be accessed at https://services.choruscall.com/links/pvc200807.html.
An on-demand replay of the webcast will be available on the Company's website beginning shortly after the webcast. The replay will also be available from August 7, 2020 through August 14, 2020 by dialing (877) 344-7529 (international (412) 317-0088) and entering the passcode 10146140.
About Penn Virginia Corporation
Penn Virginia Corporation is a pure-play independent oil and gas company engaged in the development and production of oil, natural gas liquids, or NGLs, and natural gas, with operations in the Eagle Ford shale in south Texas. For more information, please visit our website at www.pennvirginia.com. The information on the Company's website is not part of this release.
Cautionary Statements Regarding Guidance
The estimates and guidance presented in this release are based on assumptions of current and future capital expenditure levels, prices for oil, natural gas, and NGLs, impact of hedges, available liquidity, indications of supply and demand for oil, well results, and operating costs. The guidance provided in this release does not constitute any form of guarantee or assurance that the matters indicated will be achieved. While we believe these estimates and the assumptions on which they are based are reasonable as of the date on which they are made, they are inherently uncertain and are subject to, among other things, significant business, economic, operational, and regulatory risks, and uncertainties, some of which are not known as of the date of the statement. Guidance and estimates, and the assumptions on which they are based, are subject to material revision. Actual results may differ materially from estimates and guidance. Please read the "Forward-Looking Statements" section below, as well as "Risk Factors" in our annual report on Form 10-K and our quarterly reports on Form 10-Q, which are incorporated herein.
Forward-Looking Statements
This communication contains certain "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements regarding future financial or operating performance and other statements that are not historical facts are forward-looking statements, and such statements include, words such as "anticipate," "forward," "outlook," "expects," "intends," "plans," "believes," "future," "potential," "may," "possible," "should," "would," "could," "allow" and variations of such words or similar expressions, including the negative thereof, to identify forward-looking statements. Because such statements include assumptions, risks, uncertainties, and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to, the following: our ability to realize the desired benefits of hedges and predict commodity price changes; the effect of commodity and financial derivative arrangements with other parties, and counterparty risk related to the ability of these parties to meet their future obligations; any further decline in, sustained depression in and volatility of expected and realized commodity prices for oil, NGLs, and natural gas; our ability to comply with our credit agreement and maintain or increase our borrowing base; our liquidity; the uncertainties inherent in projecting future rates of production for our wells and the extent to which actual production differs from that estimated in our proved oil and gas reserves; actions by third parties, including suppliers and customers; the impact of the COVID-19 pandemic and the actions taken by regulators and third parties in response to such pandemic, the related economic downturn and the related substantial decline in demand for oil and natural gas; and other risks set forth in our filings with the SEC. Strip pricing is a forecast that speaks only as of the date published and is not necessarily indicative of actual or realized prices, which may be materially different. Additional information concerning these and other factors can be found in our press releases and public filings with the SEC. Many of the factors that will determine our future results are beyond the ability of management to control or predict. The unprecedented nature of the current pandemic and economic downturn makes it more difficult for management to determine risks and the magnitude of the impact of risks known or unknown to management. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. The statements in this communication speak only as of the date of communication. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law.
Footnotes
- Free cash flow is a non-GAAP financial measure. Definitions of non-GAAP financial measures and reconciliations of non-GAAP financial measures to the closest GAAP-based financial measures appear at the end of this release.
- Adjusted net income is a non-GAAP financial measure. Definitions of non-GAAP financial measures and reconciliations of non-GAAP financial measures to the closest GAAP-based financial measures appear at the end of this release.
- Adjusted EBITDAX is a non-GAAP financial measure. Definitions of non-GAAP financial measures and reconciliations of non-GAAP financial measures to the closest GAAP-based financial measures appear at the end of this release.
- PV-10 value is a non-GAAP measure reconciled to Standardized Measure and is defined at the end of this release.
- Adjusted Cash G&A expense is a non-GAAP financial measure. Definitions of non-GAAP financial measures and reconciliations of non-GAAP financial measures to the closest GAAP-based financial measures appear at the end of this release.
- Net Debt to LTM Adjusted EBITDAX is a ratio of the Company's Net Debt to LTM Adjusted EBITDAX, which are non-GAAP measures defined and reconciled at the end of this release.
- Net debt is a non-GAAP financial measure reconciled to Principle Amount of Long-Term Debt at the end of this release.
- For information to calculate the ratio of PV-10 value of the Company's proved developed reserves using strip pricing after giving effect to the Company's hedge position, to the Company's net debt, see table at the end of this release.
PENN VIRGINIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
and SELECTED OPERATING STATISTICS - unaudited
(in thousands, except per share, production and price data)
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | |||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Revenues | ||||||||||||||||||||
| Crude oil | $ | 41,197 | $ | 86,308 | $ | 114,031 | $ | 127,505 | $ | 208,843 | ||||||||||
| Natural gas liquids (NGLs) | 1,578 | 1,893 | 3,502 | 3,471 | 9,050 | |||||||||||||||
| Natural gas | 2,020 | 2,690 | 5,290 | 4,710 | 9,567 | |||||||||||||||
| Total product revenues | 44,795 | 90,891 | 122,823 | 135,686 | 227,460 | |||||||||||||||
| Gain (loss) on sales of assets, net | 8 | 6 | 16 | 14 | 41 | |||||||||||||||
| Other revenues, net | 679 | 482 | (72 | ) | 1,161 | 494 | ||||||||||||||
| Total revenues | 45,482 | 91,379 | 122,767 | 136,861 | 227,995 | |||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Lease operating | 9,094 | 10,532 | 10,362 | 19,626 | 21,366 | |||||||||||||||
| Gathering, processing and transportation | 5,593 | 5,444 | 6,408 | 11,037 | 10,337 | |||||||||||||||
| Production and ad valorem taxes | 2,630 | 6,154 | 7,579 | 8,784 | 13,271 | |||||||||||||||
| General and administrative | 7,035 | 6,374 | 5,215 | 13,409 | 11,242 | |||||||||||||||
| Total cash direct operating expenses | 24,352 | 28,504 | 29,564 | 52,856 | 56,216 | |||||||||||||||
| Share-based compensation - equity classified awards | 951 | 856 | 1,017 | 1,807 | 2,055 | |||||||||||||||
| Depreciation, depletion and amortization | 37,135 | 40,718 | 44,298 | 77,853 | 83,168 | |||||||||||||||
| Impairment of oil and gas properties | 35,509 | — | — | 35,509 | — | |||||||||||||||
| Total operating expenses | 97,947 | 70,078 | 74,879 | 168,025 | 141,439 | |||||||||||||||
| Operating income (loss) | (52,465 | ) | 21,301 | 47,888 | (31,164 | ) | 86,556 | |||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Interest expense, net | (8,536 | ) | (8,180 | ) | (9,056 | ) | (16,716 | ) | (18,534 | ) | ||||||||||
| Derivatives | (34,349 | ) | 151,119 | 13,603 | 116,770 | (54,414 | ) | |||||||||||||
| Other, net | (55 | ) | (8 | ) | 8 | (63 | ) | 114 | ||||||||||||
| Income (loss) before income taxes | (95,405 | ) | 164,232 | 52,443 | 68,827 | 13,722 | ||||||||||||||
| Income tax benefit (expense) | 690 | (1,138 | ) | (818 | ) | (448 | ) | (794 | ) | |||||||||||
| Net income (loss) | $ | (94,715 | ) | $ | 163,094 | $ | 51,625 | $ | 68,379 | $ | 12,928 | |||||||||
| Net income (loss) per share: | ||||||||||||||||||||
| Basic | $ | (6.24 | ) | $ | 10.76 | $ | 3.42 | $ | 4.51 | $ | 0.86 | |||||||||
| Diluted | $ | (6.24 | ) | $ | 10.76 | $ | 3.40 | $ | 4.48 | $ | 0.85 | |||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 15,167 | 15,152 | 15,106 | 15,159 | 15,102 | |||||||||||||||
| Diluted | 15,167 | 15,160 | 15,162 | 15,268 | 15,174 | |||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | |||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Production | ||||||||||||||||||||
| Crude oil (MBbls) | 1,719 | 1,881 | 1,821 | 3,599 | 3,473 | |||||||||||||||
| NGLs (MBbls) | 303 | 307 | 389 | 610 | 704 | |||||||||||||||
| Natural gas (MMcf) | 1,311 | 1,474 | 1,947 | 2,784 | 3,478 | |||||||||||||||
| Total (MBOE) | 2,240 | 2,433 | 2,534 | 4,674 | 4,756 | |||||||||||||||
| Average daily production (BOEPD) | 24,617 | 26,740 | 27,845 | 25,679 | 26,278 | |||||||||||||||
| Prices | ||||||||||||||||||||
| Crude oil ($ per Bbl) | $ | 23.97 | $ | 45.90 | $ | 62.63 | $ | 35.42 | $ | 60.14 | ||||||||||
| NGLs ($ per Bbl) | $ | 5.21 | $ | 6.16 | $ | 9.01 | $ | 5.69 | $ | 12.85 | ||||||||||
| Natural gas ($ per Mcf) | $ | 1.54 | $ | 1.83 | $ | 2.72 | $ | 1.69 | $ | 2.75 | ||||||||||
| Aggregate ($ per BOE) | $ | 20.00 | $ | 37.35 | $ | 48.47 | $ | 29.03 | $ | 47.82 | ||||||||||
| Prices - Adjusted for derivative settlements | ||||||||||||||||||||
| Crude oil ($ per Bbl) | $ | 50.37 | $ | 54.15 | $ | 59.02 | $ | 52.34 | $ | 57.76 | ||||||||||
| Natural gas ($ per Mcf) | $ | 1.79 | $ | 1.90 | $ | 2.72 | $ | 1.85 | $ | 2.75 | ||||||||||
| Aggregate ($ per BOE) | $ | 40.41 | $ | 43.78 | $ | 45.87 | $ | 42.16 | $ | 46.08 | ||||||||||
PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS - unaudited
(in thousands)
| June 30, | December 31, | |||||||
| 2020 | 2019 | |||||||
| Assets | ||||||||
| Current assets | $ | 186,288 | $ | 88,339 | ||||
| Net property and equipment | 1,099,838 | 1,120,425 | ||||||
| Other noncurrent assets | 9,590 | 9,474 | ||||||
| Total assets | $ | 1,295,716 | $ | 1,218,238 | ||||
| Liabilities and shareholders' equity | ||||||||
| Current liabilities | 130,507 | 129,274 | ||||||
| Other noncurrent liabilities | 21,436 | 13,191 | ||||||
| Total long-term debt, net | 553,234 | 555,028 | ||||||
| Total shareholders' equity | 590,539 | 520,745 | ||||||
| Total liabilities and shareholders' equity | $ | 1,295,716 | $ | 1,218,238 | ||||
PENN VIRGINIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited
(in thousands)
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
| Cash flows from operating activities | |||||||||||||||||||
| Net income (loss) | $ | (94,715 | ) | $ | 163,094 | $ | 51,625 | $ | 68,379 | $ | 12,928 | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||
| Depreciation, depletion and amortization | 37,135 | 40,718 | 44,298 | 77,853 | 83,168 | ||||||||||||||
| Impairment of oil and gas properties | 35,509 | — | — | 35,509 | — | ||||||||||||||
| Derivative contracts: | |||||||||||||||||||
| Net (gains) losses | 34,349 | (151,119 | ) | (13,603 | ) | (116,770 | ) | 54,414 | |||||||||||
| Cash settlements and premiums received (paid), net | 59,146 | (269 | ) | (8,301 | ) | 58,877 | (3,907 | ) | |||||||||||
| Deferred income tax (benefit) expense | (786 | ) | 2,320 | 818 | 1,534 | 2,030 | |||||||||||||
| Gain on sales of assets, net | (8 | ) | (6 | ) | (16 | ) | (14 | ) | (41 | ) | |||||||||
| Non-cash interest expense | 1,714 | 823 | 827 | 2,537 | 1,748 | ||||||||||||||
| Share-based compensation (equity-classified) | 951 | 856 | 1,017 | 1,807 | 2,055 | ||||||||||||||
| Other, net | 6 | 8 | 13 | 14 | 26 | ||||||||||||||
| Changes in operating assets and liabilities | (16,879 | ) | 16,048 | 8,425 | (831 | ) | 1,941 | ||||||||||||
| Net cash provided by operating activities | 56,422 | 72,473 | 85,103 | 128,895 | 154,362 | ||||||||||||||
| Cash flows from investing activities | |||||||||||||||||||
| Capital expenditures | (50,812 | ) | (62,015 | ) | (89,455 | ) | (112,827 | ) | (175,941 | ) | |||||||||
| Proceeds from sales of assets, net | 8 | 75 | 11 | 83 | 29 | ||||||||||||||
| Net cash used in investing activities | (50,804 | ) | (61,940 | ) | (89,444 | ) | (112,744 | ) | (175,912 | ) | |||||||||
| Cash flows from financing activities | |||||||||||||||||||
| Proceeds from credit facility borrowings | — | 46,000 | 20,000 | 46,000 | 32,000 | ||||||||||||||
| Repayment of credit facility borrowings | (40,000 | ) | (9,000 | ) | (5,000 | ) | (49,000 | ) | (13,000 | ) | |||||||||
| Debt issuance costs paid | (72 | ) | — | (2,518 | ) | (72 | ) | (2,518 | ) | ||||||||||
| Other, net | 1,068 | — | — | 1,068 | — | ||||||||||||||
| Net cash provided by (used in) financing activities | (39,004 | ) | 37,000 | 12,482 | (2,004 | ) | 16,482 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | (33,386 | ) | 47,533 | 8,141 | 14,147 | (5,068 | ) | ||||||||||||
| Cash and cash equivalents - beginning of period | 55,331 | 7,798 | 4,655 | 7,798 | 17,864 | ||||||||||||||
| Cash and cash equivalents - end of period | $ | 21,945 | $ | 55,331 | $ | 12,796 | $ | 21,945 | $ | 12,796 | |||||||||
PENN VIRGINIA CORPORATION
CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited
Readers are reminded that non-GAAP measures are merely a supplement to, and not a replacement for, or superior to financial measures prepared according to GAAP. They should be evaluated in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies.
Special Note About Presentation
Effective with our reporting for the period ended March 31, 2020, and for future periods, the Company is changing the manner in which settlements from derivatives are presented in the Non-GAAP financial measures "Adjusted net income" and "Adjusted EBITDAX." Previously, our presentations of such settlements were based upon the actual amount of cash paid or received during the periods presented. Because derivative financial instruments settle in cash during the month immediately following the month for which the underlying production is hedged, there exists a potential for confusion regarding our actual derivative-adjusted financial performance in the reporting period. In order to mitigate the potential for any confusion and to align our reporting with what we believe to be the dominant presentation methodology regarding such Non-GAAP financial metrics in our industry, we will present our oil derivative settlements in our Non-GAAP financial measures "Adjusted net income" and "Adjusted EBITDAX" on a realized basis whereby such settlements are matched to the periods for which the underlying production is hedged. We have applied the aforementioned presentation methodology to all prior periods presented herein.
Reconciliation of GAAP "Net income" to Non-GAAP "Adjusted net income"
Adjusted net income is a non-GAAP financial measure that represents net income adjusted to include net realized settlements of derivatives and exclude the effects, net of income taxes, of non-cash changes in the fair value of derivatives, impairment of oil and gas properties, net gains and losses on the sales of assets, acquisition, divestiture and strategic transaction costs, other net items and income tax effect of adjustments. We believe that Non-GAAP adjusted net income and non-GAAP adjusted net income per share amounts provide meaningful supplemental information regarding our operational performance. This information facilitates management's internal comparisons to the Company's historical operating results as well as to the operating results of our competitors. Since management finds this measure to be useful, the Company believes that our investors can benefit by evaluating both non-GAAP and GAAP results. Adjusted net income non-GAAP is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to net income.
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||||
| Net income (loss) | $ | (94,715 | ) | $ | 163,094 | $ | 51,625 | $ | 68,379 | $ | 12,928 | ||||||||
| Adjustments for derivatives: | |||||||||||||||||||
| Net losses (gains) | 34,349 | (151,119 | ) | (13,603 | ) | (116,770 | ) | 54,414 | |||||||||||
| Realized settlements, net | 45,285 | 15,699 | (6,584 | ) | 60,984 | (8,273 | ) | ||||||||||||
| Impairment of oil and gas properties | 35,509 | — | — | 35,509 | — | ||||||||||||||
| Gain on sales of assets, net | (8 | ) | (6 | ) | (16 | ) | (14 | ) | (41 | ) | |||||||||
| Acquisition, divestiture and strategic transaction costs | — | — | 76 | — | 800 | ||||||||||||||
| Other, net | — | — | — | — | — | ||||||||||||||
| Income tax effect of adjustments | (833 | ) | 948 | — | 132 | — | |||||||||||||
| Adjusted net income | $ | 19,587 | $ | 28,616 | $ | 31,498 | $ | 48,220 | $ | 59,828 | |||||||||
| Net income (loss), per diluted share | $ | (6.24 | ) | $ | 10.76 | $ | 3.40 | $ | 4.48 | $ | 0.85 | ||||||||
| Adjusted net income, per diluted share | $ | 1.29 | $ | 1.89 | $ | 2.08 | $ | 3.16 | $ | 3.94 | |||||||||
Reconciliation of GAAP "Net income" to Non-GAAP "Adjusted EBITDAX"
Adjusted EBITDAX represents net income before interest expense, income taxes, impairment of oil and gas properties, depreciation, depletion and amortization expense and share-based compensation expense, further adjusted to include the net realized settlements of derivatives and exclude the effects of gains and losses on sales of assets, non-cash changes in the fair value of derivatives, and special items including acquisition, divestiture, and strategic transaction costs and other items. We believe this presentation is commonly used by investors and professional research analysts for the valuation, comparison, rating, investment recommendations of companies within the oil and gas exploration and production industry. We use this information for comparative purposes within our industry. Adjusted EBITDAX is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to net income (loss). Adjusted EBITDAX as defined by Penn Virginia may not be comparable to similarly titled measures used by other companies and should be considered in conjunction with net income (loss) and other measures prepared in accordance with GAAP, such as operating income or cash flows from operating activities. Adjusted EBITDAX should not be considered in isolation or as a substitute for an analysis of Penn Virginia's results as reported under GAAP.
| Three Months Ended | LTM Ended | ||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||
| 2020 | 2020 | 2019 | 2020 | ||||||||||||
| (in thousands, except per unit amounts) | |||||||||||||||
| Net income (loss) | $ | (94,715 | ) | $ | 163,094 | $ | 51,625 | $ | 126,040 | ||||||
| Adjustments to reconcile to Adjusted EBITDAX: | |||||||||||||||
| Interest expense, net | 8,536 | 8,180 | 9,056 | 33,993 | |||||||||||
| Income tax (benefit) expense | (690 | ) | 1,138 | 818 | 1,791 | ||||||||||
| Impairment of oil and gas properties | 35,509 | — | — | 35,509 | |||||||||||
| Depreciation, depletion and amortization | 37,135 | 40,718 | 44,298 | 169,254 | |||||||||||
| Share-based compensation expense (equity-classified) | 951 | 856 | 1,017 | 3,834 | |||||||||||
| (Gain) loss on sales of assets, net | (8 | ) | (6 | ) | (16 | ) | 22 | ||||||||
| Adjustments for derivatives: | |||||||||||||||
| Net losses (gains) | 34,349 | (151,119 | ) | (13,603 | ) | (103,053 | ) | ||||||||
| Realized settlements, net | 45,285 | 15,699 | (6,584 | ) | 58,756 | ||||||||||
| Adjustment for special items: | |||||||||||||||
| Acquisition, divestiture and strategic transaction costs | — | — | 76 | — | |||||||||||
| Other, net | — | — | — | 232 | |||||||||||
| Adjusted EBITDAX | $ | 66,352 | $ | 78,560 | $ | 86,687 | $ | 326,378 | |||||||
| Net income (loss) per BOE | $ | (42.28 | ) | $ | 67.02 | $ | 20.37 | $ | 12.20 | ||||||
| Adjusted EBITDAX per BOE | $ | 29.62 | $ | 32.28 | $ | 34.21 | $ | 31.59 | |||||||
Reconciliation of GAAP "General and administrative expenses" to Non-GAAP "Adjusted cash general and administrative expenses"
Adjusted cash general and administrative expenses is a supplemental non-GAAP financial measure that excludes certain non-recurring expenses and non-cash share-based compensation expense. We believe that the non-GAAP measure of Adjusted cash general and administrative expenses is useful to investors because it provides readers with a meaningful measure of our recurring G&A expenses and provides for greater comparability period-over-period.
| Three Months Ended | Six Months Ended | ||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||
| (in thousands, except per unit amounts) | |||||||||||||||||||
| General and administrative expenses - direct | $ | 7,035 | $ | 6,374 | $ | 5,215 | $ | 13,409 | $ | 11,242 | |||||||||
| Share-based compensation - equity-classified awards | 951 | 856 | 1,017 | 1,807 | 2,055 | ||||||||||||||
| GAAP General and administrative expenses | 7,986 | 7,230 | 6,232 | 15,216 | 13,297 | ||||||||||||||
| Less: Share-based compensation - equity-classified awards | (951 | ) | (856 | ) | (1,017 | ) | (1,807 | ) | (2,055 | ) | |||||||||
| Significant special charges: | |||||||||||||||||||
| Acquisition, divestiture and strategic transaction costs | — | — | (76 | ) | — | (800 | ) | ||||||||||||
| Adjusted cash-based general and administrative expenses | $ | 7,035 | $ | 6,374 | $ | 5,139 | $ | 13,409 | $ | 10,442 | |||||||||
| GAAP General and administrative expenses per BOE | $ | 3.56 | $ | 2.97 | $ | 2.46 | $ | 3.26 | $ | 2.80 | |||||||||
| Adjusted cash general and administrative expenses per BOE | $ | 3.14 | $ | 2.62 | $ | 2.03 | $ | 2.87 | $ | 2.20 | |||||||||
Definition and Explanation of Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that management believes illustrates our ability to generate cash flows from our business that are available to be returned to our providers of financing capital represented primarily by our debt holders as we do not currently have a dividend or share repurchase program. We present Free Cash Flow as the excess (deficiency) of Discretionary cash flow over Capital additions, net. Discretionary cash flow is defined as Adjusted EBITDAX (as defined and reconciled above) less interest expense and debt issue costs and adjustments for income taxes (paid) refunded and changes for working capital. Capital additions represent our committed capital expenditure and acquisition transactions, net of any proceeds from the sales or disposition of assets. Free Cash Flow is also defined as net cash provided by operating activities less net cash used in investing activities and debt issuance costs paid. We believe Free Cash Flow is commonly used by investors and professional research analysts for the valuation, comparison, rating, investment recommendations of companies in many industries. Free Cash Flow should be considered as a supplement to net income as a measure of performance and net cash provided by operating activities as a measure of our liquidity.
| Three Months Ended | Six Months Ended | Twelve Months Ended | |||||||||
| June 30, 2020 | June 30, 2020 | June 30, 2020 | |||||||||
| (in thousands) | |||||||||||
| Adjusted EBITDAX, as reported | $ | 66,352 | $ | 144,912 | $ | 326,377 | |||||
| Interest expense, as reported, less non-cash interest | (7,524 | ) | (15,568 | ) | (33,146 | ) | |||||
| Income taxes refunded | 2,471 | 2,471 | 4,942 | ||||||||
| Debt issue costs paid | (72 | ) | (72 | ) | (170 | ) | |||||
| Working capital and other, net | (43,902 | ) | (24,740 | ) | (49,338 | ) | |||||
| Discretionary cash flows | 17,325 | 107,003 | 248,665 | ||||||||
| Capital expenditures, as reported | (10,719 | ) | (89,939 | ) | (253,630 | ) | |||||
| Acquisitions | — | — | (6,516 | ) | |||||||
| Proceeds from asset sales | 8 | 83 | 269 | ||||||||
| Sales and use tax refunds applied to capital additions | — | — | 961 | ||||||||
| Capital additions, net | (10,711 | ) | (89,856 | ) | (258,916 | ) | |||||
| Non-GAAP Free cash flow | $ | 6,614 | $ | 17,147 | $ | (10,251 | ) | ||||
| GAAP Net cash provided by operating activities | $ | 56,422 | $ | 128,895 | $ | 294,727 | |||||
| GAAP Net cash used in investing activities | (50,804 | ) | (112,744 | ) | (305,876 | ) | |||||
| Debt issuance costs paid | (72 | ) | (72 | ) | (170 | ) | |||||
| Other, net | $ | 1,068 | $ | 1,068 | $ | 1,068 | |||||
| Non-GAAP Free cash flow | $ | 6,614 | $ | 17,147 | $ | (10,251 | ) | ||||
| Net debt at beginning of period | $ | 544,069 | $ | 554,602 | $ | 527,204 | |||||
| Less: Net debt at end of period | (537,455 | ) | (537,455 | ) | (537,455 | ) | |||||
| Non-GAAP Free cash flow | $ | 6,614 | $ | 17,147 | $ | (10,251 | ) | ||||
Net Debt
Net debt, excluding unamortized discount and debt issuance costs is a non-GAAP financial measure that is defined as total principal amount of long-term debt less cash and cash equivalents. The most comparable financial measure to net debt, excluding unamortized discount and debt issuance costs under GAAP is principal amount of long-term debt. Net debt is used by management as a measure of our financial leverage. Net debt, excluding unamortized discount and debt issuance costs should not be used by investors or others as the sole basis in formulating investment decisions as it does not represent the Company's actual indebtedness.
| August 1, 2020 | June 30, 2020 | December 31, 2019 | March 31, 2020 | June 30, 2019 | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Credit Facility | $ | 334,400 | $ | 359,400 | $ | 362,400 | $ | 399,400 | $ | 340,000 | ||||||||||
| Second lien term loan, excluding unamortized discount and issue costs | 200,000 | 200,000 | 200,000 | 200,000 | 200,000 | |||||||||||||||
| Cash and cash equivalents | (10,542 | ) | (21,945 | ) | (7,798 | ) | (55,331 | ) | (12,796 | ) | ||||||||||
| Net Debt | $ | 523,858 | $ | 537,455 | $ | 554,602 | $ | 544,069 | $ | 527,204 | ||||||||||
Reconciliation of GAAP "Standardized Measure of Discounted Future Net Cash Flows" to Non-GAAP "PV-10"
Non-GAAP PV-10 value is the estimated future net cash flows from estimated proved reserves discounted at an annual rate of 10 percent before giving effect to income taxes. The standardized measure of discounted future net cash flows is the after-tax estimated future cash flows from estimated proved reserves discounted at an annual rate of 10 percent, determined in accordance with generally accepted accounting principles (GAAP). We use non-GAAP PV-10 value as one measure of the value of our estimated proved reserves and to compare relative values of proved reserves amount exploration and production companies without regard to income taxes. We believe that securities analysts and rating agencies use PV-10 value in similar ways. Our management believes PV-10 value is a useful measure for comparison of proved reserve values among companies because, unlike standardized measure, it excludes future income taxes that often depend principally on the characteristics of the owner of the reserves rather than on the nature, location, and quality of the reserves themselves. We also believe that PV10 estimates using strip pricing can be used within the industry and by creditors and securities analysts to evaluate estimated net cash flows in the current commodity price environment (using futures prices) rather than SEC pricing.
| August 1, | |||
| 2020 | |||
| (in thousands) | |||
| Standardized measure of future discounted cash flows - Proved reserves | $ | 936,792 | |
| Present value of future income taxes discounted at | 31,099 | ||
| SEC PV-10 - Proved reserves | $ | 967,891 | |
Reconciliation of SEC PV-10 and Adjusted PV-10 (non-GAAP) – Proved Developed Reserves
| August 1, | |||||
| 2020 | |||||
| (in thousands) | |||||
| Standardized measure of future discounted cash flows (proved reserves) | $ | 936,792 | |||
| Less: Future discounted cash flows attributable to proved undeveloped reserves | (231,186 | ) | |||
| Standardized measure of future discounted cash flows (proved developed reserves) | 705,606 | ||||
| Add: Present value of future income taxes attributable to proved developed reserves discounted at | 3,104 | ||||
| PV-10 of proved developed reserves | 708,710 | ||||
| Add: Adjustment for strip pricing as of August 5, 2020 for proved developed reserves | 17,269 | ||||
| Adjusted PV-10 of proved developed reserves | $ | 725,979 | |||
NYMEX pricing used in the calculation of PV-10 value at strip pricing as of August 5, 2020.
| Year | Oil per barrel WTI - Price | Natural Gas (per MMBtu) HHub - Price | ||||
| 2020 | $ | 42.97 | $ | 2.540 | ||
| 2021 | $ | 44.48 | $ | 2.766 | ||
| 2022 | $ | 45.51 | $ | 2.550 | ||
| 2023 | $ | 46.31 | $ | 2.460 | ||
| 2024 | $ | 47.03 | $ | 2.504 | ||
| 2025 | $ | 47.93 | $ | 2.578 | ||
The table below sets forth the calculation of the ratio of PV-10 of proved developed reserves adjusted for strip pricing and commodity hedge value to net debt.
| Net debt (7) (August 1, 2020) | ||
| PV-10 of Proved Developed Reserves (August 1, 2020) Adjusted for Strip Pricing (August 5, 2020) | ||
| Mark-to-Market of Commodity Hedges (August 5, 2020) | ||
| Ratio | 1.45x | |
Contact
Clay Jeansonne
Investor Relations
Ph: (713) 722-6540
E-Mail: invest@pennvirginia.com
FAQ
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