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Earthstone Energy Talks 2022 Results; Plans Five-Rig Program for 2023

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   |    Thursday,March 09,2023

Earthstone Energy, Inc. announced financial and operating results for the quarter and year ended December 31, 2022.

2023 Guidance

The Company reaffirms its guidance released on February 16, 2023 as presented below.

The Company's 2023 capital budget of $725-$775 million assumes a continuous five-rig program consisting of three rigs in the Delaware Basin and two rigs in the Midland Basin. This program is expected to result in the drilling of 82 gross / 62.7 net operated wells and participation in 1.4 net non-operated wells. The Company estimates production for 2023 to average 96,000 - 104,000 Boepd (~44% oil).

(1) POP is defined as put on production.

Fourth Quarter 2022 Highlights

• Repurchased 3 million shares of Class A Common Stock for $43.7 million
• Net income⁽¹⁾ of $185.2 million and Adjusted net income⁽²⁾ of $147.2 million
• Adjusted EBITDAX⁽²⁾ of $338.0 million, up 296% compared to Q4 2021
• Net cash provided by operating activities of $315.7 million
• Free Cash Flow⁽²⁾ of $134.5 million, up 372% compared to Q4 2021
• Reduced debt under our revolving credit facility by $121.6 million
• Average daily production of 104,766 Boepd⁽³⁾, up 246% compared to Q4 2021
• Capital expenditures of $181.9 million

Full Year 2022 Highlights

• Closed the Titus, Bighorn and Chisholm acquisitions
• Net income⁽¹⁾ of $650.6 million and Adjusted net income⁽²⁾ of $586.0 million
• Adjusted EBITDAX⁽²⁾ of $1.1 billion, up 347% year over year
• Net cash provided by operating activities of $1.0 billion
• Free Cash Flow⁽²⁾ of $508.5 million, up 377% year over year
• Average daily production of 78,167 Boepd⁽³⁾, up 215% year over year
• Capital expenditures of $530.6 million

Robert J. Anderson, President and Chief Executive Officer of Earthstone stated, "During the fourth quarter and throughout the year, our team has performed exceptionally well and set new Company records. For the full year, we delivered record production levels, Adjusted EBITDAX, and generated over $500 million of Free Cash Flow. We are also focused on debt-adjusted per share growth in production and reserve value and are pleased to be delivering strong growth on these key measures, as outlined in our investor presentation. As previously released, our team delivered very strong operating results in the fourth quarter with daily production approaching 105,000 Boepd, and with oil production exceeding the mid-point of our guidance range by nine percent."

"We also advanced our Permian Basin consolidation strategy in 2022, completing three significant accretive acquisitions totaling $2 billion while still managing to reduce leverage, ending 2022 with a last quarter annualized leverage ratio of 0.8x. These material transactions increased our scale, lowered our per unit cost structure, and deepened our high-quality inventory, which now stands at over ten years."

"As we move into 2023, we remain focused on generating substantial free cash flow, reducing debt to improve our already strong balance sheet, and looking for accretive acquisitions. We have built a sizable and resilient Company and believe our intrinsic value per share significantly exceeds our current share price, offering a compelling value proposition for our current and future shareholders."

Liquidity Update

As of December 31, 2022, we had $520.1 million of long-term debt outstanding under our senior secured credit facility ("Credit Facility"), including the term loan tranche of $250 million, with elected commitments of $1.2 billion, resulting in available borrowings of approximately $679.9 million. As of December 31, 2022, our borrowing base was $1.85 billion.

Capital Expenditures

During 2022, we incurred capital expenditures of approximately $530.6 million, on an accrual basis, primarily consisting of drilling and completion costs. The Company's 2023 capital budget of $725-775 million assumes a five-rig program consisting of two rigs operating in the Midland Basin and three rigs operating in the Delaware Basin. This program is expected to result in the spudding of 82 gross / 62.7 net operated wells and bringing 79 gross / 59.7 net operated wells online and spudding 1.4 net non-operated wells and bringing 2.3 net non-operated wells online in 2023.

Hedge Position

Hedging Activities

The following table sets forth our outstanding derivative contracts at December 31, 2022. When aggregating multiple contracts, the weighted average contract price is disclosed.

(1) The basis differential price is between WTI Midland Argus Crude and the WTI NYMEX.
(2) The basis differential price is between W. Texas (WAHA) and the Henry Hub NYMEX.

The following tables set forth our outstanding derivative contracts at March 1, 2023. When aggregating multiple contracts, the weighted average contract price is disclosed.

(1) The basis differential price is between WTI Midland Crude and the WTI NYMEX.
(2) The basis differential price is between W. Texas (WAHA) and the Henry Hub NYMEX.

Conference Call Details