Drilling & Completions | Fourth Quarter (4Q) Update | Reserves | Financial Results | Capital Markets | Drilling Activity

Earthstone Energy Preliminary Fourth Quarter Results, Reserves

Email    |    Print    |    Bookmark

You Need to login first

   |    Wednesday,February 16,2022

Earthstone Energy, Inc. provided an operations update, released 2022 guidance and announced its year-end 2021 estimated proved reserves.

The Company has estimated its oil and gas sales volumes for the fourth quarter of 2021 to be approximately 2.78 MMBoe or an average of approximately 30,244 Boepd (43% oil). For the year ended December 31, 2021, the Company estimates its annual sales volumes grew 62% to approximately 9.06 MMBoe, or an average of approximately 24,809 Boepd (48% oil) compared to 15,276 Boepd (57% oil) reported for 2020. The Company also announced its year-end 2021 SEC total estimated proved reserves of approximately 147.6 MMBoe and $2.0 billion of PV-10 ⁽¹⁾. Incorporating the closing of the Chisholm Acquisition and the pending Bighorn Acquisition and utilizing NYMEX strip pricing, total reserves as of year-end were 330.2 MMBoe and $3.9 billion of PV-10. ⁽²⁾

Key highlights include:

• Average daily production for the fourth quarter of 2021 was 30,244 Boepd compared to 14,809 Boepd for the fourth quarter of 2020, representing an increase of 104% year over year ⁽³⁾
• $51.4 million and $128.2 million of capital expenditures in the fourth quarter of 2021 and full year 2021, respectively, falling below the low end of our 2021 capital guidance
• Full year 2022 production guidance of 64,250 to 67,750 Boepd (~41% oil) and $410-440 million of capital expenditures to support a four-rig operated program
• Completed the Chisholm Acquisition on February 15, 2022
• Plan to continue operating two rigs in the Midland Basin and two rigs in the Northern Delaware Basin throughout 2022
• Stand-alone year-end 2021 SEC total estimated proved PV-10 and reserves were $2.0 billion and 147.6 MMBoe (63% Proved Developed; 41% oil), respectively ⁽¹⁾
• Strong balance sheet and liquidity position with the increased $825 million borrowing base and elected commitments under our senior secured credit facility (the "Credit Facility") with further commitments to increase it to $1,325 million conditioned upon the closing of the previously announced Bighorn Acquisition

Liquidity Update

As of December 31, 2021, we had $4 million in cash and $320 million of long-term debt outstanding under our Credit Facility with a borrowing base of $650 million. With the $330 million of undrawn borrowing base capacity and $4 million in cash, we had total liquidity of approximately $334 million. Subsequent to year-end, Earthstone closed on its previously announced Chisholm Acquisition. When adjusted to include the additional borrowings to fund the actual cash consideration due at the closing of the Chisholm Acquisition, we had an estimated $4 million in cash and $604 million of debt outstanding under our Credit Facility with a borrowing base of $825 million. With the $221 million of undrawn borrowing base capacity and $4 million in cash, we had total liquidity of approximately $225 million on a combined basis. Furthermore, lenders under the Credit Facility have committed to increasing the borrowing base and elected commitments by an incremental $500 million to $1,325 million conditioned upon the closing of the Bighorn Acquisition, which is anticipated to occur in mid-April.

Operational Update

We have been operating two drilling rigs in the Midland Basin since the third quarter of 2021. Currently, one rig is drilling in each of Midland and Irion Counties. The Midland County rig is drilling a four-well pad in our Hamman project area in which we hold a 70% working interest and will average 7,200-foot laterals. The Irion County rig is drilling a five-well pad in our Barnhart project area in which we hold 100% working interest and will average ~9,900-foot laterals. Including wells in progress at year-end, we spud 26 gross / 23.3 net operated wells in 2021.

In the fourth quarter of 2021, we completed four gross (3.5 net) wells on our West Hartgrove pad in Reagan County where we targeted the Upper and Lower Wolfcamp B zones with average laterals of approximately 5,700 feet. We also completed three gross (2.2 net) wells on our Hamman 30 pad in Upton County where we targeted the Wolfcamp A and Lower Wolfcamp B zones with average laterals of approximately 4,500 feet. Including these completions which were turned to sales during the fourth quarter, we brought online a total 19 gross / 15.4 net operated wells in 2021.

Additionally, we are completing five gross (5.0 net) wells on our Nickel Saloon pad in Upton County. These wells targeted the Wolfcamp A, Wolfcamp B and Wolfcamp C zones with an average lateral length of approximately 10,100 feet and we expect to have these wells online in late February 2022. There are also nine gross (8.7 net) wells that are drilled and waiting on completions in the Midland Basin.

The Company is focused on efficiently integrating the newly acquired Chisholm assets into our operations. This includes the two rigs currently operating on the Chisholm acreage in the northern Delaware Basin of New Mexico. Currently, these rigs are drilling a two-well pad in our Anaconda project area in which we hold a 42% working interest and will average 10,000-foot laterals targeting the 3rd Bone Spring, and a two-well pad in our Minis project area in which we hold a 96% working interest and will average 7,500-foot laterals targeting the 3rd Bone Spring. The first well on each pad has been drilled and is awaiting completion with the drilling of the second well on each pad expected to be finished drilling by the end of the month and with the wells expected to be online in the early fourth quarter.

There are currently two gross (1.4 net) drilled but uncompleted wells located on the Chisholm acreage and a total of five gross (3.2 net) wells turned online this year so far. These five gross wells brought online were all located in Lea County and targeted the 2nd and 3rd Bone Spring zones.

Year-End 2021 SEC Estimated Proved Reserves

Earthstone Stand-Alone Year-End 2021 Estimated Proved Reserves Highlights:

• Proved Reserves of 147.6 MMBoe with corresponding PV-10 of $2.02 billion
• Proved Reserves are 41.4% oil, 26.4% natural gas liquids, and 32.2% natural gas
• Proved Reserves are 63% Proved Developed and 37% Proved Undeveloped