Quarterly / Earnings Reports | Third Quarter (3Q) Update

Jagged Peak Talks Q3 2019 Results

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Jagged Peak Energy reported its Q3 2019 results.

Operational Updates

In the Company's Whiskey River asset, the Company brought online its Coriander project. This project was the Company's first six-well co-development project. The average lateral length of these wells was 8,535 feet and had an average DC&E per lateral foot cost of approximately $1,090. These wells were brought online in late August and produced a pad-average peak IP-30 of 102 Boe per day per 1,000 foot (84% oil).

In mid-October, the Company brought online its second co-development project, the Venom project which consisted of eight wells in the Whiskey River area. The average lateral length of these wells was 7,900 feet and had an average DC&E per lateral foot cost of approximately $1,220. Given the timing of the wells being brought online, meaningful production information is not yet available.

Guidance Update

Due to the definitive merger agreement with Parsley Energy, Inc. ("Parsley"), Jagged Peak has discontinued providing guidance and long-term outlook information regarding its results of operations and does not intend to update the previously issued guidance and long-term outlook information, including the guidance provided in the Company's August 8, 2019 press release announcing its second quarter 2019 financial and operating results (the "second quarter earnings release"). Accordingly, investors are cautioned not to rely on historical forward-looking statements regarding guidance and long-term outlook information, including any such information provided in the second quarter earnings release, as those forward-looking statements were the estimates of management only as of the date provided, have not and will not be updated and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.

Third Quarter Results

During the third quarter of 2019, the Company turned online 17 gross operated wells and reported average daily oil production for the quarter of 30.0 MBbls per day, at the midpoint of the Company's previously announced guidance range of 29.4 - 30.6 MBbls per day. Total equivalent production averaged 39.3 MBoe per day for the third quarter. Third quarter production mix was comprised of 76% oil, 13% NGLs, and 11% natural gas, and is unchanged from the prior quarter.

For the third quarter of 2019, the Company reported net income of $30.6 million, or $0.14 per diluted common share. Net loss for the third quarter of 2018 was $26.6 million, or $0.12 per diluted common share. Adjusted net income (a non-GAAP measure) for the third quarter of 2019, was $21.9 million, or $0.10 per diluted common share, compared to $39.3 million, or $0.18 per diluted common share for the same period in 2018. Adjusted net income (a non-GAAP measure) eliminates certain non-cash and non-recurring items such as certain equity-based compensation, non-cash mark-to-market gains or losses on derivatives and impairment expense, further adjusted for any associated changes in estimated income tax expense. Adjusted EBITDAX (a non-GAAP measure) for the third quarter of 2019 was $108.2 million, a decrease of $10.4 million from the third quarter of 2018.

Please reference the reconciliations of these non-GAAP measures to the most directly comparable GAAP measures at the end of this release.

Revenue for the third quarter of 2019 was $150.1 million, compared to $155.4 million in the third quarter of 2018. The decrease in revenue for the third quarter of 2019 compared to the same period in 2018 was primarily due to an 11% decrease in unhedged realized pricing on a per Boe basis. Average realized prices for the third quarter of 2019 are included in the table below.

Capital expenditures for DC&E activities were $162.6 million for the three months ended September 30, 2019. Operated and non-operated activity during the quarter included drilling 19 gross (15.8 net) and completing 25 gross (18.3 net) wells. A portion of the capital spent during the third quarter relates to 20 gross (19.6 net) operated wells that were in various stages of being drilled or completed at September 30, 2019. Including capital expenditures for infrastructure of $4.5 million, and leasehold acquisition costs of $17.7 million, total capital expenditures for the quarter were $184.8 million.

The table below provides a comparative breakout of the Company's capital expenditures for the periods indicated:

The Company continues to drive down its DC&E costs through continued efficiency gains. DC&E costs averaged approximately $1,160 per lateral foot in the third quarter of 2019. Year-to-date the Company has averaged approximately $1,200 per lateral foot, compared to its full-year 2019 goal of $1,250 per lateral foot.

Financial Update

At the end of the third quarter of 2019, the Company had $215.0 million drawn on its revolving credit facility and $10.6 million of cash on the balance sheet, resulting in total liquidity of $335.6 million. Net debt to LTM adjusted EBITDAX (a non-GAAP measure) was 1.7x as of the end of the third quarter. Due to the definitive merger agreement with Parsley, the Company has received a waiver from its bank group to postpone its Fall borrowing base redetermination.

Since the hedging update on August 8, 2019, the Company has added to its 2020 WTI swaps, which are now at 20,000 Bbls per day of oil. These additions are included in the commodity hedges