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Earthstone Energy First Quarter 2021 Results

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   |    Tuesday,May 11,2021

Earthstone Energy, Inc. reported its Q1 2021 results.

Year-to-Date 2021 Highlights:

• Closed the IRM Acquisition⁽¹⁾ on January 7, 2021
• Signed the Tracker/Sequel Purchase Agreements⁽²⁾ on March 31, 2021 with an anticipated closing early in the third quarter of 2021
• Average daily production of 20,321 Boepd⁽³⁾
• Adjusted EBITDAX⁽⁴⁾ of $43.8 million ($23.97 per Boe)
• All-in cash costs⁽⁴⁾ of $12.65 per Boe
• Operating Margin⁽⁴⁾ of $32.64 per Boe ($26.71 including realized hedge settlements)
• Free Cash Flow⁽⁴⁾ of $31.8 million
• Net loss of $10.6 million, or $0.14 per Adjusted Diluted Share⁽⁴⁾
  • Adjusted net income of $13.4 million, or $0.17 per Adjusted Diluted Share⁽⁴⁾

Mr. Robert J. Anderson, President and CEO of Earthstone, commented, "The first quarter of 2021 was outstanding for the Earthstone team as we continue to grow our business, while maintaining low debt compared to cash flows. We closed and integrated the IRM assets, had strong financial results with almost $32 million in free cash flow, reduced debt by $37 million from $260 million upon closing IRM to $223 million at quarter-end and announced another accretive acquisition. Despite an estimated 5-7% reduction in volumes for the quarter due to the effects of the winter storm in February, we reported strong operational performance with over 20,000 Boepd of production and continued cost control. We resumed our drilling program in March and completed five wells in the quarter. Finally, we announced the next step in our consolidation effort with the Tracker/Sequel Purchase Agreements which are expected to close early in the third quarter. With the strong start to the year, we expect to deliver on our previous commitment to increasing scale and profitable growth."

Operational Update

The Company completed five wells and initiated a one-rig drilling program in the Midland Basin during the first quarter of 2021. Five gross (3.7 net) wells were completed in Upton County in the Hamman project in the Wolfcamp A and B zones. Peak 30-day production averaged 493 Boepd (86% oil) per well with average completed lateral lengths of approximately 4,600 feet from each of the five wells. The drilling program began with a three-well pad (2.1 net wells) in Midland County targeting the Jo Mill, Lower Spraberry and Wolfcamp B zones. The wells will have average laterals of approximately 6,800 feet. We will follow this pad with a four-well pad (95% working interest) on the recently acquired IRM acreage in Midland County. Completion activity on the Midland County wells is expected to begin in the second quarter with wells turned online in the third quarter. We then expect to keep the rig in Upton County for the remainder of the year.

Liquidity Update

As of March 31, 2021, we had $1.4 million in cash and $223.4 million of long-term debt outstanding under our senior secured revolving credit facility (our "Credit Facility") with a borrowing base of $360 million. With the $136.6 million of undrawn borrowing base capacity and $1.4 million in cash, we had total liquidity of approximately $138.0 million. Adjusted for the increase in the borrowing base to $475 million as of April 20, 2021, we had $251.6 million of undrawn borrowing base capacity and $1.4 million in cash, resulting in total liquidity of approximately $253.0 million. Through March 31, 2021, we had incurred $9.8 million of our estimated $90-$100 million in capital expenditures for 2021. We expect to fund our remaining 2021 capital expenditures through internally generated funds and continue generating free cash flow that will enable us to continue to pay down debt.