Exploration & Production | Quarterly / Earnings Reports

Bonanza Creek Touts Strong Codell Well, Record Drill Times in Q2

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   |    Monday,August 12,2013

Bonanza Creek Energy Inc. reported its second quarter 2013 financial and operating results, including an update to its catalyst well testing program in the Wattenberg Field and the southern Arkansas Cotton Valley oil development.

Financial Highlights:

• Sales volumes of 13,492 Boe/d comprised of 71% crude oil and liquids; a 55% increase over second quarter 2012 and a 10% increase over first quarter 2013;
• Rocky Mountain region production increased 105% over second quarter 2012; Wattenberg horizontal production increased 266% over second quarter 2012 and increased 30% over first quarter 2013;
• Revenue of $84.5 million, a 64% increase over second quarter 2012, and an average sales price before hedging of $68.83 per Boe;
• Adjusted EBITDAX (non-GAAP) of $53.9 million, a 46% increase over second quarter 2012; and
• Net income of $14.7 million, or $0.36 per share; adjusted net income (non-GAAP) of $10.8 million, or $0.27 per share.

Operational Highlights:

• Our second Codell horizontal well, first of 2013, produced a strong initial 30-day rate of 601 Boe/d and a 60-day rate of 467 Boe/d at 64% crude oil;
• Our first two 40-acre spaced Niobrara B Bench test wells performed as expected, producing initial 30-day rates of 426 Boe/d at 82% crude oil and 409 Boe/d at 77% crude oil;
• Our second extended reach lateral in the Niobrara B Bench, drilled to 9,449 feet of lateral length and successfully completed with a 40-stage fracture stimulation for a total cost of $7.4 million, produced an initial 30-day rate of 767 Boe/d, 80% crude oil; 
• A new record drill time on a horizontal well in the Wattenberg Field, achieving a spud to spud time of eight days; the average spud to spud for the quarter was 11.3 days, a 26% improvement over last year's average; and
• Our second 5-acre pilot in Dorcheat-Macedonia produced an average initial 30-day rate of 72 Boe/d, above forecast.

Michael Starzer, Bonanza Creek's President and Chief Executive Officer, commented, "I am pleased to report that the Company achieved new records in production, revenue and EBITDAX during the quarter. Second quarter production results were consistent with the growth imbedded in our annual plan as the horizontal development program, which now comprises approximately 86% of Wattenberg production, continues to impress. During the first six months of the year we brought 28 horizontal wells online in the Wattenberg out of our 74 wells planned for first production during 2013. The timing of our 2013 well development is being executed in line with our engineering plan, which underpins our annual guidance methodology. To date, the balance of our 2013 plan is on schedule and as such, we reaffirm our full year guidance of approximately 60% year over year production growth as well as the ranges for annual lease operating expense and cash G&A. We are very encouraged by the results of our catalyst wells providing increased visibility into the expanding value of Bonanza Creek's attractive oil and liquids weighted assets."

Operations Update

During second quarter 2013, the Company achieved an average production rate of 13,492 Boe/d from continuing operations, comprised of 65% crude oil, 6% NGLs, and 29% natural gas, increasing total production by 55% over second quarter 2012. 

Bonanza Creek Ups Wattenberg Production 105%

Bonanza Creek Spuds 12 Cotton Valley; Uses 5 to 10-Acre Spacing

Q2 2013 Financial Results from Continuing Operations

Net revenue for second quarter 2013 was $84.5 million, compared to $51.5 million for second quarter 2012. Crude oil and liquids revenue accounted for approximately 89% of total revenue.

Average realized prices for second quarter 2013, before the effect of commodity derivatives, were $89.41 per Bbl of oil, $4.47 per Mcf of natural gas and $49.03 per Bbl of NGLs, compared to $89.47 per Bbl of oil, $3.05 per Mcf of natural gas and $47.03 per Bbl of NGLs for second quarter 2012.

Lease operating expense (LOE) for second quarter 2013 was $12.9 million, or $10.50 per Boe, compared to $7.0 million, or $8.77 per Boe, for second quarter 2012. LOE included approximately $650,000 of charges in the Mid-Continent region related to the replacement of essential processing equipment in the Company's Dorcheat-Macedonia gas plant and other non-recurring well work. LOE was also impacted in the quarter by approximately $450,000 in the Rocky Mountain region in additional cost related to increased rental expense for additional compressors to combat high gas pipeline pressures and summer emissions control requirements.

General and administrative expense (G&A) for second quarter 2013 was $13.3 million, or $10.82 per Boe, compared to $7.1 million, or $8.96 per Boe, for second quarter 2012. Cash G&A (non-GAAP) was $10.6 million, or $8.63 per Boe for the second quarter of 2013 compared to $6.3 million, or $7.96 per Boe for second quarter 2012. Cash G&A in the current period was impacted by approximately $1.2 million of legal and other professional services.

Depreciation, depletion and amortization (DD&A) for second quarter 2013 was $29.5 million, or $24.04 per Boe, compared to $13.0 million, or $16.43 per Boe, for the second quarter 2012.  Proved reserves associated with our vertical wells in the Wattenberg were revised downward at mid-year resulting from an overall shift to horizontal development and lower than expected well performance due to high line pressures. As a result, the net increase to Company-wide proved developed reserves was not commensurate with the increase to our depletion cost base which resulted in a higher DD&A rate for the second quarter.

Interest expense for second quarter 2013 was approximately $5.9 million compared to $0.7 million for the second quarter 2012. The increase in interest expense is primarily related to the issuance of $300 million of 6.75% Senior Notes on April 9, 2013.

Net income for second quarter 2013 was $14.7 million, or $0.36 per diluted share, compared to net income of $21.5 million, or $0.54 per diluted share, for second quarter 2012. Adjusted net income (non-GAAP) for second quarter 2013 was $10.8 million, or $0.27 per diluted share, compared to adjusted net income from continuing operations of $12.5 million, or $0.32 per diluted share for second quarter 2012.

Bonanza Creek began the divestiture process of its California properties in the second quarter 2012, with one property remaining to be sold as of June 30, 2013. Under generally accepted accounting principles, the results of operations for the California properties are presented as "discontinued operations." Consequently, production, revenue and expenses associated with the California properties have been removed from the discussion of operations and reported separately as discontinued operations in our accompanying statement of operations and condensed balance sheets. Our statements of cash flows and our non-GAAP financial measure of EBITDAX are presented inclusive of production, revenue and expenses associated with the California properties.

Financial & Guidance Update

On April 9, 2013, Bonanza Creek issued $300 million of Senior Notes due 2021 priced at par with a coupon of 6.75%. The Company used $191.5 million of the proceeds of the offering to repay all outstanding borrowings under its revolving credit facility, with the remainder available to fund future capital expenditures.

Liquidity

As of June 30, 2013, Bonanza Creek had a $600 million revolving credit facility with an undrawn borrowing base of $330 million, a letter of credit totaling $48 million and cash totaling $46 million, resulting in total liquidity of $328 million. Schedule 7 provides a calculation of total liquidity.