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Extraction Oil & Gas 2021 Plan; Q4, Full Year 2020 Results

Share Print Bookmark    |    Friday,March 19,2021

Extraction Oil & Gas reported financial and operating results for the fourth-quarter and full-year 2020 and provided updated guidance for the full-year 2021.

2021 Guidance

The Company is revising its previously issued guidance to reflect various operating updates as well as pricing assumptions of $60/Bbl WTI oil price, $2.80/MMbtu gas and NGL realizations of 30% of WTI for the remainder of the year:

The Company expects to exit 2021 with no debt outstanding and, subject to market conditions, the Company expects to establish a dividend policy by year-end 2021.

Q4 and Full-Year 2020 Highlights

• Achieved average net sales volumes of 82,944 barrels of oil equivalent per day (Boe/d), of which 37% was crude oil and 62% total liquids, for the three months ended December 31, 2020. Average net sales volumes for the year ended December 31, 2020, were 88,907 Boe/d, of which 39% was crude oil and 63% total liquids.
  
  
• Emerged from financial restructuring with total debt of $265 million drawn on its $500 million credit facility
  
  
• Eliminated major midstream minimum volume commitments and negotiated new, cost-competitive midstream agreements
  
  
• Appointed a new, highly engaged Board of Directors focused on shareholder alignment
  
  
• Expecting to exit 2021 with no debt outstanding

“Extraction now has a strong balance sheet, low cost structure and shareholder-aligned governance structures complementing the high-quality asset base and safe operations for which we have been well-known,” said Tom Tyree, Chief Executive Officer of Extraction. “We are well-positioned to operate at the front of the industry cost curve, generate significant cash flow, repay our outstanding debt and establish a dividend policy by year-end,” he said. “We plan to accomplish this while continuing to reduce our environmental impact and focus on returning real value to our communities.”

Financial Results

For the fourth quarter, Extraction reported crude oil, natural gas and NGL sales revenue of $171 million, as compared to $286 million during the same period in 2019, representing a decrease of $114 million, driven primarily by lower production and lower commodity prices.

Extraction reported net loss of $444 million, or $3.22 per basic and diluted share¹ for the fourth quarter, driven by lower realized sales prices and impairment expenses of $207 million. This compared to a net loss of $1.4 billion for the same period in 2019. Adjusted EBITDAX² was $113 million for the fourth quarter, down 45% quarter-over-quarter. Adjusted EBITDAX, Unhedged was $105 million for the fourth quarter, down 48% quarter-over-quarter. Please read “Non-GAAP Financial Measures,” included herein.

Debt and Liquidity

As of March 15, 2021, Extraction had $26 million in cash and $254 million drawn on its revolving credit facility, which has elected commitments of $500 million.

Operating Results

Fourth quarter average net sales volumes were 82,944 Boe/d, a decrease of 25% from the fourth quarter in 2019. Fourth quarter crude oil volumes of 30,455 Bbl/d decreased 39% from the fourth quarter in 2019. Fourth quarter NGL volumes of 20,807 Bbl/d decreased 7% from the fourth quarter in 2019. During the fourth quarter of 2020, crude oil and NGLs accounted for approximately 65% and 15% of the Company’s total revenues recorded, respectively.

Extraction incurred approximately $160 million in capital expenditures during 2020, drilling 37 gross (25.7 net) wells with an average lateral length of 2.3 miles and completing 45 gross (34.1 net) wells with an average lateral length of 2.4 miles. The Company also acquired approximately $17 million of leasehold and surface acreage during the year.

“Over the past year, our team put tremendous effort into finding ways to lower our cost structure,” said Matt Owens, President and Chief Operating Officer of Extraction. “I am proud to say this effort was successful, as we anticipate drilling the lowest-cost wells in company history – and we achieved savings in excess of 20% on the operating expense side.”

Proved Reserves at December 31, 2020

Extraction’s estimated 2020 year-end proved reserves are 146 MMBoe, a 43% decrease when compared to year-end 2019 proved reserves of 254 MMBoe. This decrease was driven primarily by PUD expirations in accordance with the SEC five-year drilling rule caused by the change in business strategy to focus on Free Cash Flow generation rather than production growth. The Company’s estimated proved developed reserves at year-end 2020 were 112 MMBoe, a decrease of 22% year-over-year. Year-end 2020 proved reserves are comprised of approximately 45 MMBbl of oil and 39 MMBbl of NGLs.

During the year ended December 31, 2020, Extraction recognized $198 million in impairment expense on its oil and gas properties as a result of lower forecasted commodity prices and a more measured pace of development to focus on Free Cash Flow generation. In accordance with Securities and Exchange Commission (“SEC”) guidelines, Extraction’s proved reserves at December 31, 2020 were computed using SEC pricing of $39.57 per barrel of crude oil and $1.99 per million British Thermal Units for natural gas, before adjustments for energy content, quality, midstream fees, and basis differentials. Prices adhere to the SEC requirement to use the unweighted arithmetic average of the first-day-of-the-month price for the preceding twelve months without giving effect to derivative transactions. Reserve estimates for 2020 were prepared by Extraction’s independent reservoir engineering firm, Ryder Scott Company, L.P.