Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


August 7, 2019
Date of Report (Date of earliest event reported)


Bonanza Creek Energy, Inc.
(Exact name of registrant as specified in its charter)

Delaware
001-35371
61-1630631
(State or other jurisdiction of incorporation or organization)
(Commission File No.)
(I.R.S. employer identification number)


410 17th Street, Suite 1400
Denver, Colorado 80202
(Address of principal executive offices, including zip code)

(720) 440-6100
(Registrant’s telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o







Item 2.02
Results of Operations and Financial Condition.
On August 7, 2019, Bonanza Creek Energy, Inc. (the “Company”) announced its results for the fiscal quarter ended June 30, 2019. A copy of the Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01
Exhibits.
(d)    Exhibits
Exhibit No.
Description









SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
Bonanza Creek Energy, Inc.
 
 
 
Dated: August 7, 2019
 
By:
/s/ Cyrus D. Marter IV
 
 
Name:
Cyrus D. Marter IV
 
 
Title:
Executive Vice President, General Counsel and Secretary
 
 
 
 






Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13049289&doc=3
Exhibit 99.1
NEWS RELEASE



Bonanza Creek Energy Announces
Second Quarter 2019 Financial Results

DENVER, August 7, 2019 – Bonanza Creek Energy, Inc. (NYSE: BCEI) (the "Company" or "Bonanza Creek") today announced its second quarter 2019 financial results and operating outlook and has posted an updated investor presentation on its corporate website.

Highlights of the second quarter 2019 include:

Increasing 2019 annual production guidance to a range of 22.0 to 24.0 MBoe/d following strong second quarter 2019 sales volumes of 24.4 MBoe/d, up 18% over first quarter 2019 and 38% over fourth quarter 2018

The Whitetail A-4 well in the Company's Northern acreage is performing consistent with the Company's Legacy East XRL type curve

Net oil and gas revenue of $85.8 million, an increase of 18% over first quarter 2019

GAAP net income of $41.0 million, or $1.99 per diluted share, inclusive of $0.42 non-cash gain on derivatives

Adjusted EBITDAX(1) of $56.2 million, or $2.72 per diluted share, an increase of 14% sequentially

Lease operating expenses of $2.87 per Boe, a decrease of 1% over first quarter 2019

Total general and administrative ("G&A") expense, including non-cash, stock-based compensation, of $9.8 million. Cash G&A(1), excluding stock-based compensation, was $8.0 million for the quarter or $3.61 per Boe, down 24% from first quarter 2019

Combined cash costs of LOE, Rocky Mountain Infrastructure ("RMI") operating expenses, gathering, transportation and processing ("GT&P"), and cash G&A totaled $9.65 per Boe for the quarter, down 13% from first quarter 2019

Total capital expenditures of $81.7 million for the quarter and $126.5 million year to date, in line with Company's full year 2019 guidance of $230.0 to $255.0 million

(1) Non-GAAP measure, see attached reconciliation schedules at the end of this release.

Eric Greager, President and Chief Executive Officer of Bonanza Creek, commented, "We're encouraged with our development performance to date, and are raising our annual production guidance to a range of 22 to 24 MBoe per day with this release. Our capex in the first quarter was light versus our plan, but we paced





ahead of schedule in the second quarter. Our capex year-to-date is in line with our full year expectations, having invested approximately 52% of the mid-point of our annual guidance. We're also excited to share results from our Whitetail well, which we drilled on our Northern acreage in late 2018. The well has been performing in line with our Eastern XRL type curve, and along with the Pronghorn B-28 pad, continues to demonstrate the quality of our acreage."

Second Quarter 2019 Results

During the second quarter of 2019, the Company reported average daily sales of 24.4 MBoe/d. Product mix for the quarter was 62% oil, 16% NGLs, and 22% residue natural gas. During the second quarter of 2019, the Company drilled 17 gross (11.2 net) operated wells, seven of which were extended reach lateral ("XRL") wells, and completed 19 gross (17.0 net) operated wells. As planned, there were no wells turned to sales during the second quarter. The company expects to turn 23 gross (20.4 net) wells to sales during the third quarter.

The table below provides operating statistics for our Wattenberg assets.
 
 
Three Months Ended June 30,(2)
 
 
 
2019


2018


% Change
 
Avg. Daily Sales Volumes:
 







 
Crude oil (Bbls/d)
 
15,096



8,866



70%
 
Natural gas (Mcf/d)
 
31,901



18,511



72%
 
Natural gas liquids (Bbls/d)
 
4,015



3,126



28%
 
Crude oil equivalent (Boe/d)
 
24,428



15,077



62%
 
 
 









 
Product Mix
 









 
  Crude oil
 
62
%


59
%



 
  Natural gas
 
22
%


20
%



 
  Natural gas liquids
 
16
%


21
%



 
 
 









 
Average Sales Prices (before derivatives):
 









 
  Crude oil (per Bbl)
 
$
54.10



$
63.05




 
  Natural gas (per Mcf)
 
$
1.94



$
1.96




 
  Natural gas liquids (per Bbl)
 
$
11.66



$
17.06




 
  Crude oil equivalent (per Boe)
 
$
37.88



$
43.02




 
 
 
 
 
 
 
 
 
 
 
(2) Results for three months ended are for Wattenberg only. Please see tables in the back of this press release and our Quarterly Report on Form 10-Q filed on August 7, 2019 for total Company operating statistics for the 2018 period.

Net oil and gas revenue for the second quarter of 2019 was $85.8 million compared to $72.6 million for the first quarter of 2019. The increase was primarily a result of increased production and higher oil realizations, partially offset by lower natural gas and NGL realized prices. Crude oil accounted for approximately 87% of total revenue for the quarter. Differentials for the Company's oil production during the quarter averaged approximately $5.90 per barrel off of NYMEX WTI.

LOE for the second quarter of 2019 on a unit basis decreased by 1% to $2.87 per Boe from $2.91 per Boe in the first quarter of 2019 and is in line with full year 2019 guidance of $2.75 to $3.25 per Boe. Additionally, RMI operating expenses for the second quarter were $1.22 per Boe compared to $1.24 per Boe in first quarter of 2019, also in line with the Company's expectations and full year guidance of $1.10 to $1.40 per Boe.






The Company's general and administrative ("G&A") expenses were $9.8 million for the second quarter of 2019, which included $1.8 million in non-cash stock-based compensation. Cash G&A, which excludes stock-based compensation, of $8.0 million for the second quarter was down from $8.9 million in the first quarter of 2019. On a per unit basis, the Company's Cash G&A decreased 24% sequentially from $4.77 per Boe in the first quarter to $3.61 per Boe in the second quarter.

Cash G&A is a non-GAAP measure. Please see Schedule 7 at the end of this release for a reconciliation from GAAP G&A to cash G&A.

Oil began flowing through the Company's new oil gathering line to the Riverside Terminal in late July. The Company's oil differential will benefit from a $1.25 to $1.50 reduction for barrels flowing through the line. The first oil sales from the line occurred in early August. Oil volumes flowing through the line will build through the remainder of 2019, but not all of the Company's oil sales will flow through the new line. The Company's oil differential guidance of $4.25 to $5.25 per barrel for the year contemplates the improved differential and expectations of oil sales through the line for the remainder of the year.

Guidance Summary

Guidance
2Q19 Actuals
YTD 2019 Actuals
FY19 Guidance
   Production (MBoe/d)
24.4
22.3
22.0 - 24.0
   LOE ($/Boe)
$2.87
$2.89
$2.75 - $3.25
   RMI Opex ($/Boe)
$1.22
$1.23
$1.10 - $1.40
   Cash G&A ($/Boe)
$3.61
$4.14
$3.70 - $4.20
   Severance Ad/Valorem (% of rev)
9.2%
7.7%
8% - 9%
   Oil Differential ($/bbl)(1)
$5.90
$5.69
$4.25 - $5.25
   Total Capex ($MM)
$82
$127
$230 - $255
   D&C Capex ($MM)
$64
$102
$210 - $220
(1) Oil differential guidance based on WTI pricing through June 30, 2019, strip pricing as of August 6th, and includes the benefit of oil flowing through the company's new oil gathering line.

Conference Call Information

The Company will host a conference call to discuss these results on August 8, 2019 at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time). A live webcast and replay of this event will be available on the Investor Relations section of the Company’s website at www.bonanzacrk.com. Dial-in information for the conference call is included below.

Type
Phone Number
Passcode
Live participant
877-793-4362
6557808
Replay
855-859-2056
6557808


About Bonanza Creek Energy, Inc.

Bonanza Creek Energy, Inc. is an independent oil and natural gas company engaged in the acquisition, exploration, development, and production of oil and associated liquids-rich natural gas in the Rocky Mountain region of the United States. The Company’s assets and operations are concentrated in rural, unincorporated Weld County within the Wattenberg Field, focused on the Niobrara and Codell formations. The Company’s common shares are listed for trading on the NYSE under the symbol: “BCEI.” For more information about the Company, please visit www.bonanzacrk.com. Please note that the Company routinely posts important information about the Company under the Investor Relations section of its website.





Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by the Company based on management’s experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words “will,” “potential,” “believe,” “estimate,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “plan,” “predict,” “project,” “profile,” “model” or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements include statements regarding development and completion expectations and strategy; decreasing operating and capital costs; impact of the Company's reorganization; and updated 2019 guidance. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, that may cause actual results to differ materially from those implied or expressed by the forward-looking statements, including the following: changes in natural gas, oil and NGL prices; general economic conditions, including the performance of financial markets and interest rates; drilling results; shortages of oilfield equipment, services and personnel; operating risks such as unexpected drilling conditions; ability to acquire adequate supplies of water; risks related to derivative instruments; access to adequate gathering systems and pipeline take-away capacity; and pipeline and refining capacity constraints. Further information on such assumptions, risks and uncertainties is available in the Company’s SEC filings. We refer you to the discussion of risk factors in our Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 28, 2019, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 7, 2019, and other filings submitted by us to the Securities Exchange Commission. The Company’s SEC filings are available on the Company’s website at www.bonanzacrk.com and on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, including guidance, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.


For further information, please contact:
Scott Landreth
Senior Director, Finance & Investor Relations and Treasurer
720-225-6679
slandreth@bonanzacrk.com






Schedule 1: Statements of Operations
(in thousands, expect for per share amounts, unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Operating net revenues:
 

 
 
 
 

 
 
Oil and gas sales
$
85,783

 
$
71,872

 
$
158,377

 
$
136,064

Operating expenses:
 

 
 

 
 

 
 

Lease operating expense
6,390

 
11,316

 
11,816

 
21,775

Gas plant and midstream operating expense
2,709

 
3,247

 
5,030

 
6,860

Gathering, transportation, and processing
4,331

 
1,660

 
8,353

 
3,998

Severance and ad valorem taxes
7,711

 
6,071

 
11,959

 
11,303

Exploration
408

 
221

 
505

 
250

Depreciation, depletion, and amortization
18,898

 
9,564

 
34,657

 
17,072

Abandonment and impairment of unproved properties
878

 
2,477

 
1,757

 
4,979

Unused commitments

 

 

 
21

General and administrative expense (including $1,768, $2,184, $3,148, and $3,192, respectively, of stock-based compensation)
9,803

 
9,917

 
20,081

 
19,451

Total operating expenses
51,128

 
44,473

 
94,158

 
85,709

Income from operations
34,655

 
27,399

 
64,219

 
50,355

Other income (expense):
 

 
 
 
 

 
 
Derivative gain (loss)
8,173

 
(22,012
)
 
(28,371
)
 
(30,754
)
Interest expense
(385
)
 
(805
)
 
(1,536
)
 
(1,162
)
Loss on sale of properties, net
(1,432
)
 

 
(306
)
 

Other income
11

 
277

 
23

 
290

Total other income (expense)
6,367

 
(22,540
)
 
(30,190
)
 
(31,626
)
Income from operations before taxes
41,022

 
4,859

 
34,029

 
18,729

Income tax benefit (expense)

 

 

 

Net income
$
41,022

 
$
4,859

 
$
34,029

 
$
18,729

 
 
 
 
 
 
 
 
Comprehensive income
$
41,022

 
$
4,859

 
$
34,029

 
$
18,729

 
 
 
 
 
 
 
 
Basic net income per common share
$
1.99

 
$
0.24

 
$
1.65

 
$
0.91

 
 
 
 
 
 
 
 
Diluted net income per common share
$
1.99

 
$
0.24

 
$
1.65

 
$
0.91

 
 
 
 
 
 
 
 
Basic weighted-average common shares outstanding
20,618

 
20,488

 
20,588

 
20,471

 
 
 
 
 
 
 
 
Diluted weighted-average common shares outstanding
20,664

 
20,603

 
20,630

 
20,538
















Schedule 2: Statements of Cash Flows
(in thousands, unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Cash flows from operating activities:
 

 
 
 
 

 
 
Net income
$
41,022

 
$
4,859

 
$
34,029

 
$
18,729

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Depreciation, depletion, and amortization
18,898

 
9,564

 
34,657

 
17,072

Abandonment and impairment of unproved properties
878

 
2,477

 
1,757

 
4,979

Well abandonment costs and dry hole expense

 

 
62

 

Stock-based compensation
1,768

 
2,184

 
3,148

 
3,192

Amortization of deferred financing costs
123

 

 
248

 

Derivative loss (gain)
(8,173
)

22,012

 
28,371

 
30,754

Derivative cash settlements
(543
)
 
(7,310
)
 
393

 
(11,622
)
Loss on sale of properties, net
1,432

 

 
306

 

Other
(1
)
 

 
(901
)
 
172

Changes in current assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
8,852

 
(4,618
)
 
15,089

 
(20,376
)
Prepaid expenses and other assets
(263
)
 
(2,467
)
 
(703
)
 
935

Accounts payable and accrued liabilities
(683
)
 
(323
)
 
(10,833
)
 
(889
)
Settlement of asset retirement obligations
(583
)
 
(132
)
 
(1,175
)
 
(797
)
Net cash provided by operating activities
62,727

 
26,246

 
104,448

 
42,149

Cash flows from investing activities:
 

 
 
 
 

 
 
Acquisition of oil and gas properties
(10,376
)
 
(1,197
)
 
(11,738
)
 
(1,295
)
Exploration and development of oil and gas properties
(74,895
)
 
(53,818
)
 
(111,398
)
 
(91,482
)
Proceeds from sale of oil and gas properties

 

 
1,153

 
20

Additions to property and equipment - non oil and gas
(72
)
 
(177
)
 
(148
)
 
(280
)
Net cash used in investing activities
(85,343
)
 
(55,192
)
 
(122,131
)
 
(93,037
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Proceeds from Current Credit Facility

 

 
15,000

 

Proceeds from Prior Credit Facility

 
45,000

 

 
60,000

Proceeds from exercise of stock options

 
968

 

 
968

Payment of employee tax withholdings in exchange for the return of common stock
(930
)
 
(794
)
 
(1,083
)
 
(794
)
Net cash provided by financing activities
(930
)
 
45,174

 
13,917

 
60,174

Net change in cash, cash equivalents, and restricted cash
(23,546
)
 
16,228

 
(3,766
)
 
9,286

Cash, cash equivalents, and restricted cash:
 

 
 

 
 

 
 

Beginning of period
32,782

 
5,840

 
13,002

 
12,782

End of period
$
9,236

 
$
22,068

 
$
9,236

 
$
22,068









Schedule 3: Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
June 30, 2019
 
December 31, 2018
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
9,149

 
$
12,916

Accounts receivable:
 

 
 

Oil and gas sales
40,341

 
31,799

Joint interest and other
23,946

 
47,577

Prepaid expenses and other
5,336

 
4,633

Inventory of oilfield equipment
2,946

 
3,478

Derivative assets
11,116

 
34,408

Total current assets
92,834

 
134,811

Property and equipment (successful efforts method):
 

 
 

Proved properties
802,452

 
719,198

Less: accumulated depreciation, depletion and amortization
(86,265
)
 
(52,842
)
Total proved properties, net
716,187

 
666,356

Unproved properties
155,882

 
154,352

Wells in progress
133,364

 
93,617

Other property and equipment, net of accumulated depreciation of $2,853 in 2019 and $2,546 in 2018
3,490

 
3,649

Total property and equipment, net
1,008,923

 
917,974

Long-term derivative assets
1,176

 
3,864

Right-of-use assets
38,623

 

Other noncurrent assets
3,782

 
4,885

Total assets
$
1,145,338

 
$
1,061,534

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued expenses
$
45,087

 
$
79,390

Oil and gas revenue distribution payable
30,262

 
19,903

Current portion of lease liability
10,593

 

Derivative liability
2,066

 
183

Total current liabilities
88,008

 
99,476

 
 
 
 
Long-term liabilities:
 

 
 

Credit facility
65,000

 
50,000

Lease liability
28,792

 

Ad valorem taxes
34,370

 
18,740

Asset retirement obligations for oil and gas properties (note 9)
29,162

 
29,405

Total liabilities
245,332

 
197,621

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Stockholders’ equity:
 

 
 

Preferred stock, $.01 par value, 25,000,000 shares authorized, none outstanding

 

Common stock, $.01 par value, 225,000,000 shares authorized, 20,632,999 and 20,543,940 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
4,285

 
4,286

Additional paid-in capital
698,526

 
696,461

Retained earnings
197,195

 
163,166

Total stockholders’ equity
900,006

 
863,913

Total liabilities and stockholders’ equity
$
1,145,338

 
$
1,061,534







Schedule 4: Per unit operating margins
(unaudited)

 
Three Months Ended June 30,(1)
 
Six Months Ended June 30,(1)
 
2019
 
2018
 
Percent Change
 
2019
 
2018
 
Percent Change
Sales volume
 
 
 
 
 
 
 
 
 
 
 
Oil (MBbl)
1,374

 
807

 
70
 %
 
2,582

 
1,552

 
66
 %
Gas (MMcf)
2,903

 
1,685

 
72
 %
 
5,101

 
3,328

 
53
 %
NGL (MBbl)
365

 
284

 
29
 %
 
657

 
502

 
31
 %
Equivalent (MBoe)
2,223

 
1,372

 
62
 %
 
4,089

 
2,609

 
57
 %
 
 
 
 
 
 
 
 
 
 
 
 
Realized pricing (before derivatives)
 
 
 
 
 
 
 
 
 
 
 
Oil ($/Bbl)
$
54.10

 
$
63.05

 
(14
)%
 
$
52.10

 
$
60.15

 
(13
)%
Gas ($/Mcf)
$
1.94

 
$
1.96

 
(1
)%
 
$
2.43

 
$
2.29

 
6
 %
NGL ($/Bbl)
$
11.66

 
$
17.06

 
(32
)%
 
$
13.10

 
$
19.34

 
(32
)%
Equivalent ($/Boe)
$
37.88

 
$
43.01

 
(12
)%
 
$
38.04

 
$
42.43

 
(10
)%
 
 
 
 
 
 
 
 
 
 
 
 
Per Unit Costs ($/Boe)
 
 
 
 
 
 
 
 
 
 
 
Realized price equivalent (before derivatives)
$
37.88

 
$
43.01

 
(12
)%
 
$
38.04

 
$
42.43

 
(10
)%
Lease operating expense
2.87

 
6.01

 
(52
)%
 
2.89

 
6.01

 
(52
)%
Gathering, transportation and processing
1.95

 
1.21

 
61
 %
 
2.04

 
1.53

 
33
 %
Gas plant and midstream operating expense
1.22

 
1.59

 
(23
)%
 
1.23

 
1.74

 
(29
)%
Severance and ad valorem
3.47

 
3.89

 
(11
)%
 
2.92

 
3.78

 
(23
)%
Cash general and administrative(2)
3.61

 
5.78

 
(38
)%
 
4.14

 
6.38

 
(35
)%
Total cash operating costs
$
13.12

 
$
18.48

 
(29
)%
 
$
13.22

 
$
19.44

 
(32
)%
Cash operating margin (before derivatives)
$
24.76

 
$
24.53

 
1
 %
 
$
24.82

 
$
22.99

 
8
 %
Derivative cash settlements
(0.24
)
 
(5.33
)
 
(95
)%
 
0.10

 
(4.45
)
 
(102
)%
Cash operating margin (after derivatives)
$
24.52

 
$
19.20

 
28
 %
 
$
24.92

 
$
18.54

 
34
 %
 
 
 
 
 
 
 
 
 
 
 
 
Non-cash items
 
 
 
 
 
 
 
 
 
 
 
Non-cash general and administrative
$
0.80

 
$
1.59

 
(50
)%
 
$
0.77

 
$
1.22

 
(37
)%

(1) The Company's Mid-Continent region assets were sold on August 6, 2018, and therefore, the data in the table reflects Mid-Continent region activity during the three and six months ended June 30, 2018.
(2) Cash general and administrative expense excludes stock-based compensation of $1.8 million and $2.2 million for the three months ended June 30, 2019 and 2018, respectively, and $3.1 million and $3.2 million for the six months ended June 30, 2019 and 2018, respectively.





Schedule 5: Adjusted Net Income
(in thousands, except per share amounts, unaudited)

Adjusted net income is a supplemental non-GAAP financial measure that is used by management to present recurring profitability that is more comparable between periods by excluding items that are non-recurring in nature or items which are not easily estimable. Management believes adjusted net income provides external users of the Company's consolidated financial statements such as industry analysts, investors, creditors, and rating agencies with additional information to assist in their analysis of the Company. The Company defines adjusted net income as net income after adjusting first for (1) the impact of certain non-cash items and one-time transactions and then (2) the non-cash and one-time items’ impact on taxes based on a tax rate that approximates the Company's effective tax rate in each period. Adjusted net income is not a measure of net income as determined by GAAP.

The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of adjusted net income.


 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net income
 
$
41,022

 
$
4,859

 
$
34,029

 
$
18,729

Adjustments to net income:
 
 
 
 
 
 
 
 
Derivative loss (gain)
 
(8,173
)
 
22,012

 
28,371

 
30,754

Derivative cash settlements
 
(543
)
 
(7,310
)
 
393

 
(11,622
)
Loss on sale of oil and gas properties
 
(1,432
)
 

 
(306
)
 

Abandonment and impairment of unproved properties
 
878

 
2,477

 
1,757

 
4,979

Well abandonment and exploratory dry hole expense
 

 

 
62

 

Unused commitments
 

 

 

 
21

Stock-based compensation (1)
 
1,768

 
2,184

 
3,148

 
3,192

Severance costs (1)
 

 

 
418

 

Total adjustments before taxes
 
(7,502
)
 
19,363

 
33,843

 
27,324

Income tax effect
 

 

 

 

Total adjustments after taxes
 
$
(7,502
)
 
$
19,363

 
$
33,843

 
$
27,324

 
 
 
 
 
 
 
 
 
Adjusted net income
 
$
33,520

 
$
24,222

 
$
67,872

 
$
46,053

Adjusted net income per diluted share
 
$
1.62

 
$
1.18

 
$
3.29

 
$
2.24

 
 
 
 
 
 
 
 
 
Diluted weighted-average common shares outstanding
 
20,664

 
20,603

 
20,630

 
20,538

 
 
 
 
 
 
 
 
 
(1) Included as a portion of general and administrative expense in the statements of operations.
 






Schedule 6: Adjusted EBITDAX
(in thousands, unaudited)

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management to provide a metric of the Company's ability to internally generate funds for exploration and development of oil and gas properties. The metric excludes items which are non-recurring in nature and/or items which are not reasonably estimable. Management believes adjusted EBITDAX provides external users of the Company’s consolidated financial statements such as industry analysts, investors, lenders, and rating agencies with additional information to assist in their analysis of the Company. The Company defines Adjusted EBITDAX as earnings before interest expense, income taxes, depreciation, depletion, amortization, impairment, exploration expenses and other similar non-cash and non-recurring charges. Adjusted EBITDAX is not a measure of net income (loss) or cash flows as determined by GAAP.

The following table presents a reconciliation of the GAAP financial measure of net income to the non-GAAP financial measure of Adjusted EBITDAX.

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Net income
 
$
41,022

 
$
4,859

 
$
34,029

 
$
18,729

Exploration
 
408

 
221

 
505

 
250

Depreciation, depletion and amortization
 
18,898

 
9,564

 
34,657

 
17,072

Amortization of deferred financing costs
 
123

 

 
248

 

Abandonment and impairment of unproved properties
 
878

 
2,477

 
1,757

 
4,979

Unused commitments
 

 

 

 
21

Stock-based compensation (1)
 
1,768

 
2,184

 
3,148

 
3,192

Severance costs (1)
 

 

 
418

 

Loss on sale of oil and gas properties
 
1,432

 

 
306

 

Interest expense
 
385

 
805

 
1,536

 
1,162

Derivative loss (gain)
 
(8,173
)
 
22,012

 
28,371

 
30,754

Derivative cash settlements
 
(543
)
 
(7,310
)
 
393

 
(11,622
)
Income tax effect
 

 

 

 

Adjusted EBITDAX
 
$
56,198

 
$
34,812

 
$
105,368

 
$
64,537

 
 
 
 
 
 
 
 
 
(1) Included as a portion of general and administrative expense in the statements of operations.







Schedule 7: Recurring Cash G&A
(in thousands, unaudited)

Recurring cash G&A is a supplemental non-GAAP financial measure that is used by management to provide only the cash portion of its G&A expense, which can be used to evaluate cost management and operating efficiency on a comparable basis from period to period. Management believes recurring cash G&A provides external users of the Company’s consolidated financial statements such as industry analysts, investors, lenders, and rating agencies with additional information to assist in their analysis of the Company. The Company defines recurring cash G&A as GAAP general and administrative expense exclusive of the Company's stock based compensation and one-time charges. The Company refers to recurring cash G&A to provide typical recurring cash G&A costs that are planned for in a given period. Recurring cash G&A is not a fully inclusive measure of general and administrative expense as determined by GAAP.

The following table presents a reconciliation of the GAAP financial measure of general and administrative expense to the non-GAAP financial measure of recurring cash G&A.

 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
General and administrative expense
 
$
9,803

 
$
9,917

 
$
20,081

 
$
19,451

Stock-based compensation
 
(1,768
)
 
(2,184
)
 
(3,148
)
 
(3,192
)
Cash G&A
 
$
8,035

 
$
7,733

 
$
16,933

 
$
16,259