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Earthstone Energy Third Quarter 2021 Results

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   |    Wednesday,November 10,2021

Earthstone Energy, Inc. reported its Q3 2021 results.

Third Quarter 2021 Highlights:

  • Executed the Foreland Acquisition PSAs(1) on September 30, 2021, which closed subsequent to quarter end on November 2, 2021
  • Closed the Tracker Acquisition(2) on July 20, 2021
  • Net income attributable to Earthstone Energy, Inc. of $10.4 million, or $0.20 per Diluted Share
  • Net income of $18.8 million, or $0.20 per Adjusted Diluted Share(3)
  • Adjusted net income(3) of $30.7 million, or $0.35 per Adjusted Diluted Share(3)
  • Adjusted EBITDAX(3) of $65.0 million ($27.36 per Boe)
  • Net cash provided by operating activities of $53.9 million
  • Free Cash Flow(3) of $17.8 million
  • Average daily production of 25,836 Boepd(4)

Year-to-Date 2021 Highlights:

  • Closed the IRM Acquisition(5), Tracker Acquisition(2) and Eagle Ford working interest acquisitions(6)
  • $2,035 million PV-10(3) value estimated by the Company on October 1, 2021 with total estimated proved reserves of 160.0 MMBoe, based on NYMEX strip pricing, only including estimated proved developed reserves of 13.3 MMBoe from the Foreland Acquisition
  • $1,299 million PV-10(3) value of estimated proved developed reserves of 96.5 MMBoe included in total proved reserve estimates above
  • Net loss attributable to Earthstone Energy, Inc. of $4.3 million, or $(0.09) per Diluted Share
  • Net loss of $7.5 million, or $(0.09) per Adjusted Diluted Share(3)
  • Adjusted net income of $64.4 million(3), or $0.81 per Adjusted Diluted Share(3)
  • Adjusted EBITDAX(3) of $162.6 million ($25.91 per Boe)
  • Net cash provided by operating activities of $147.3 million
  • Free Cash Flow(3) of $78.1 million
  • Average daily production of 22,978 Boepd

Mr. Robert J. Anderson, President and CEO of Earthstone, commented, "The Company had a strong third quarter, generating the highest quarterly production and Adjusted EBITDAX in the Company's history. Our focus on cost control is manifested in our lowest quarter ever for combined LOE and Cash G&A at just under $7.50 per Boe, with both LOE per Boe and Cash G&A coming in below our guidance. We ramped up operations in the quarter by adding a second drilling rig in the Midland Basin and continued our well completion program with four wells brought online and four wells in process of completing. After closing our fourth acquisition this year which will increase our cashflows and with the Company's strong free cash flow generation, we will improve upon our previously disclosed leverage target and are now on track to have Debt to Adjusted EBITDAX approaching 1.0x at year-end.

"Our continued efforts to create profitable growth and increased scale through acquisitions and effective operations is evident in our 75% increase in third quarter production versus the fourth quarter of last year. We will continue to search for profitable growth opportunities while executing on our operating plan, focusing on high margins and low costs and maintaining our strong balance sheet."

Operational Update

The Company has been operating one drilling rig in the Midland Basin since the first quarter of 2021 and added a second drilling rig in the third quarter. Currently both rigs are drilling in Upton County, Texas. One rig is on our Nickel Saloon five-well pad where we have a 100% working interest and will average approximately 10,000-foot laterals. The other rig is on our Benedum six-well pad where we hold a 100% working interest and will average 7,500-foot laterals. We expect to spud one additional pad before year-end with one of these rigs which will result in our operated program spudding 29 gross / 25.4 net wells for the year.

In Midland County, we completed three gross (2.1 net) wells late in the second quarter on our Hamman 45 pad where we targeted the Jo Mill, Lower Spraberry and Wolfcamp B zones with average laterals of approximately 6,800 feet. These wells are currently producing ~1,500 Boepd (80% oil). We also recently completed a four well pad (3.8 net) on the IRM acreage acquired in early 2021. Completions occurred in the Lower Spraberry and Wolfcamp A zones with average laterals of approximately 5,000 feet and the wells are still cleaning up.

We are currently completing four gross (3.5 net) wells on our Hartgrove West pad in western Reagan County. These wells targeted the Wolfcamp B zones with an average lateral length of approximately 5,700 feet and we expect to have these wells online in November. We expect to bring our final pad online near year-end which will be three gross (2.3 net) wells from our Hamman 30 pad in Upton County bringing our total completed wells brought online for the year to 19 gross/15.4 net. Additionally, we expect to be in the process of completing five gross (5.0 net) wells on the Nickel Saloon pad around year-end and expect those wells to be online early in the first quarter of 2022.

Updated 2021 Guidance

The Company has updated its 2021 guidance based upon the closing of the Foreland Acquisition on November 1, 2021 and on current operational activity. The Company expects to generate significant positive free cash flow(1) in 2021. The Company's capital expenditures budget excludes acquisitions.

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