Jagged Peak Energy Inc. Announces Second Quarter 2017 Financial and Operating Results

DENVER, Aug. 9, 2017 /PRNewswire/ -- Jagged Peak Energy Inc. (NYSE: JAG) ("Jagged Peak" or the "Company") today announced financial and operating results for the second quarter ended June 30, 2017. The financial and operating results discussed in this news release include the results for Jagged Peak Energy LLC (the "Predecessor") which became a wholly owned subsidiary of Jagged Peak Energy Inc. as the result of transactions associated with the Company's initial public offering ("IPO") in January 2017.

Second Quarter 2017 Highlights

    --  Production volumes were 14,714 Boe/d (81% oil) for the quarter, an
        increase of 166% compared to second quarter of 2016 and an increase of
        50% compared to the first quarter of 2017. Adjusting for gas volumes
        that were flared during the first quarter of 2017, the percent oil of
        total production was unchanged at 81% quarter-over-quarter and remains
        within the Company's previously stated guidance range of 80% - 82% for
        full-year 2017.
    --  The Company drilled 13 gross operated horizontal wells and completed and
        put online 14 gross operated horizontal wells during the second quarter
        of 2017. For the first six months of 2017, the Company drilled 23 gross
        operated horizontal wells and completed and put online 21 gross operated
        horizontal wells.
    --  Total leasehold position increased to approximately 70,400 net acres as
        of June 30, 2017, with over 1,400 future well locations identified in
        the 3(rd) Bone Spring, Wolfcamp A and Wolfcamp B formations
    --  The Company's first 2(nd) Bone Spring well, the County Line 18A-C2 1H,
        produced an IP30 of approximately 180 Boe/d per 1,000' (85% oil) from a
        completed lateral length of 4,843'. The Company estimates the 2(nd) Bone
        Spring is prospective on approximately 85% of the Company's current
        leasehold and has the potential to add over 200 locations to its
        undrilled inventory, the majority of which would be 1.5 and 2.0 section
        locations.
    --  Based on recent and historical well results, average EURs in the
        Company's Big Tex project area are forecasted at approximately 800 MBoe
        (82% oil) normalized to a 7,000' completed lateral length, or 114 MBoe
        per 1,000'. For all wells that the Company has drilled in Big Tex, the
        average per well production has been 15% above the Company's internal
        type curve over the first 175 days of production.
    --  Net income for the quarter was $16.4 million. Eliminating certain
        non-cash charges and the non-cash gain on commodity derivative
        contracts, adjusted net income (a non-GAAP measure)(1) was $9.9 million,
        or $0.05 per diluted common share.
    --  Adjusted EBITDAX (a non-GAAP measure)(1) was $39.3 million, or $29.34
        per Boe of production
    --  Capital expenditures for drilling and completion activities were $148.9
        million. Additionally, $9.8 million was spent on infrastructure and
        $25.7 million was spent to add over 1,800 net acres to the Company's
        leasehold position during the second quarter of 2017.
    --  Total liquidity of $337 million at the end of the quarter, comprised of
        $87 million in cash and equivalents and the Company's currently undrawn
        $250 million borrowing base under its credit facility
    --  Since the end of the first quarter of 2017, the Company has entered into
        additional swap contracts to hedge approximately 4.8 MMBbls of oil
        through the end of 2019 at an average WTI price of over $50.00 per
        barrel. The Company has hedged nearly 70% of forecasted oil production
        for the second half of 2017 at an average WTI price of over $51.00 per
        barrel.

Commenting on the second quarter results, Joe Jaggers, Chairman, Chief Executive Officer and President of Jagged Peak said, "Our team continued to execute according to plan in the second quarter, with production volumes coming in comfortably within our stated guidance. The Company saw production climb 50% over the first quarter of 2017 and 166% over the second quarter of 2016. With an oil cut of 81%, our production volumes remain some of the oiliest in the Delaware Basin. Based on wells we've drilled as a Company, we have seen oil cuts remain constant over the productive life of our wells. This superior oil cut, as well as our extensive infrastructure, resulted in an adjusted EBITDAX margin of $29.34 per Boe. During the second quarter, we brought online our first 2(nd) Bone Spring well. This well has produced an average of over 725 Boe/d from a completed lateral length of 4,843' over its first 65 days online. As a result, we have planned an additional 2(nd) Bone Spring well in the third quarter of 2017. On the land front, our team added over 1,800 leasehold acres at attractive prices."

Regarding Jagged Peak's plan going forward, Mr. Jaggers continued, "Our strong operating results, premier acreage position and experienced organization are evident in our outstanding financial results. We remain well capitalized with ample liquidity to fund our multi-rig program even in the current commodity price environment. Our contiguous acreage position allows us to drill extended length lateral wells across our leasehold; these extended length laterals represent approximately 70% of our inventory. Additionally, we are actively working to keep costs under control and to combat service cost inflation. As evidenced by our strong second quarter results and our July net production rate of 17,800 Boe/d, I have the utmost confidence in our team's ability to continue to execute our development plan and climb the production ramp. In fact, we have seen production continue to climb beyond July with production averaging an estimated 20,000 Boe/d during the first week of August."

Operating Update

The Company began 2017 operating three drilling rigs and added a fourth operated rig in January and a fifth operated rig in March. As of the end of the second quarter of 2017, the Company was operating 5 drilling rigs. The Company remains committed to its previously announced full-year drilling and completions guidance of 54 to 58 spuds and 50 to 55 completions. At the present time and taking into account the current commodity price environment, the Company intends to maintain this current level of activity as it has ample liquidity and nearly 70% of forecasted oil production hedged at over $51.00 per barrel for the second half of 2017.

The Company drilled 13 gross operated horizontal wells and completed 14 gross operated horizontal wells during the quarter. Additionally, during the quarter, the Company participated in 4 gross non-operated horizontal spuds and 2 gross non-operated horizontal completions. At the end of the second quarter, the Company had 4 wells that were currently being completed and 4 wells that were awaiting completion. Since the end of the quarter through July 31, 3 and 5 additional gross operated horizontal wells were drilled and completed, respectively.

Notable recent individual well results, production activity and upcoming catalysts include the following:

    --  The Company's first 2(nd) Bone Spring well, the County Line 18A-C2 1H
        (completed lateral length 4,843'), produced an IP30 of approximately 180
        Boe/d per 1,000' (85% oil) and has produced approximately 47,163 Boe
        (85% oil) in its first 65 days online. Based on production to date,
        these results are in line with the Company's Wolfcamp A wells, making
        the County Line 18A-C2 1H one of the most prolific 2(nd) Bone Spring
        wells in the area. The Company estimates the 2(nd) Bone Spring is
        prospective on approximately 85% of the Company's current leasehold and
        has the potential to add over 200 locations to its undrilled inventory,
        the majority of which would be 1.5 and 2.0 section locations.
    --  In addition to testing new target zones, the Company's ongoing
        development of its core Wolfcamp program continues to show the following
        impressive results:
        --  In the Cochise project area, the UTL 38-17-2H achieved an IP30 of
            258 Boe/d per 1,000' in the lower Wolfcamp A.
        --  In the structurally eastern Whiskey River project area, one of the
            Company's latest lower Wolfcamp A wells, the State Quadricorn-1617A
            GG Houston-1H, is showing promising early results and is currently
            making over 1,500 Boe/d. The Quadricorn well is notable for its
            proximity to the Central Basin Platform and provides further
            evidence of a high quality Wolfcamp reservoir across the Company's
            acreage position.
        --  In the central Whiskey River project area, the Eiland 0812A-GG
            Houston-1H had an IP30 of 226 Boe/d per 1,000' in the lower Wolfcamp
            A. Also in Whiskey River, the previously announced Skinwalker 2-8 1H
            had cumulative production of 189,700 Boe, or 1,084 Boe/d, in its
            first 175 days.
        --  In the southern Whiskey River project area, the Coriander 2524-C3 1H
            is showing strong initial results. The well was put on production at
            the end of July and has produced a peak 24-hour rate of 229 Boe per
            1,000'. Rates are expected to climb further as the well is in the
            early stages of post-completion clean up.
    --  The Company is continuing development of the lower Wolfcamp B with
        encouraging results. The Collier 1202H (completed lateral length 7,465')
        was brought online in mid-July in the Whiskey River project area. The
        Collier well is producing over 1,200 Boe/d after 22 days of production
        and continues to improve as it tracks over 50% above the first lower
        Wolfcamp B well in Jagged Peak's program, the State Eiland 9-33 1H
        (completed lateral length 10,273').
    --  Wells in the Big Tex project area have continued to show production that
        is higher than the Company's internal type curve for that area. For all
        wells the Company has drilled in Big Tex, the average per well
        production has been 472 Boe/d over the first 175 days of production for
        each well, which is 15% above the Company's internal type curve. Since
        making the decision to install ESPs earlier in a Big Tex well's
        productive life, results have been positive. The Company has tested this
        concept with five recent wells and has experienced flatter declines and
        more robust production rates. The average per well production for these
        five wells is 643 Boe/d over the first 175 days online, which is 36%
        above the average for all of Big Tex and 57% above the Company's Big Tex
        type curve.
    --  Upcoming operational catalysts for the Company include testing new
        reservoirs and increased well density. The Company is currently drilling
        a Wolfcamp C well on its Whiskey River acreage. Additionally, the
        Company plans to drill a 3(rd) Bone Spring well in the third quarter of
        2017. To continue testing increased density, the Company drilled a
        second spacing test in its Cochise project area, which is a 2-well pad
        that will test staggered spacing in the upper and lower Wolfcamp A. The
        Company also plans to drill a 3-well pad on 660' spacing within the same
        landing zone during the third quarter of 2017 in its Cochise project
        area.

From January 1 through July 31, the Company has ramped up production with 26 new operated wells coming online. The Company is currently producing from 46 wells drilled and completed by the Company, up from 20 wells at the end of 2016. The Company's net operated production for the month of July was 17,800 Boe/d.

Financial Results

For the second quarter 2017, the Company reported net income of $16.4 million, which includes non-cash equity based compensation expense of $10.8 million. Net loss for the second quarter of 2016 was $5.7 million. Adjusted EBITDAX (a non-GAAP measure) for the second quarter of 2017 was $39.3 million, an increase of $25.7 million from the second quarter of 2016 and $10.2 million from the first quarter 2017.

For the second quarter 2017, the Company reported adjusted net income (a non-GAAP measure) of $9.9 million. Adjusted net income (a non-GAAP measure) eliminates certain non-cash and non-recurring items such as equity-based compensation and income tax expense directly related to the IPO, non-cash mark-to-market gains or losses on derivatives, and impairment expense, further adjusted for the associated changes in estimated income tax expense. For the second quarter 2016, the Company reported adjusted net income (a non-GAAP measure) of $3.6 million.

The Company's average realized sales prices, including settlement of realized oil hedges, were $46.29 per barrel of oil, $2.56 per Mcf of natural gas and $19.00 per barrel of natural gas liquids. The total oil equivalent price for the quarter was $40.67 per Boe compared to the second quarter 2016 total equivalent price of $35.77 per Boe and the first quarter 2017 total equivalent price of $43.30 per Boe. Additionally, lease operating expense, including workovers, ("LOE") of $2.90 per Boe was 24% greater than second quarter 2016 of $2.33 per Boe. During the first six months of 2017, LOE averaged $2.48 per Boe compared to $3.39 per Boe during the same period in 2016.

Adjusted EBITDAX and adjusted net income (loss) are non-GAAP measures. Please reference the reconciliations to the most directly comparable GAAP measures at the end of this release.

Capital Expenditures

Capital expenditures for drilling and completion activities were $148.9 million for the three months ended June 30, 2017, which represents capital spent to drill and complete 16 gross (14.3 net) wells, of which 14 gross (13.8 net) wells were drilled and completed by Jagged Peak. Additionally, the Company had 12 gross (11.1 net) wells that were in various stages of being drilled or completed at the end of the quarter. Adding in capital expenditures for infrastructure of $9.8 million and leasehold capital of $25.7 million, total capital expenditures for the quarter were $184.4 million. The $25.7 million spent on leasehold acquisitions added over 1,800 net undeveloped acres, increasing the Company's leasehold position to approximately 70,400 net acres as of June 30, 2017.


                               Three Months Ended June 30,              Six Months Ended June 30,

                                2017                               2016                 2017                  2016
                                ----                               ----                 ----                  ----

                                                    (in thousands)

    Capital Expenditures for
     Oil and Gas Activities

    Acquisitions

    Proved properties              $                        -                            $             -           $      -    $    -

    Unproved properties       25,709                                     13,255                            48,519       23,651

    Development costs        148,906                                     18,481                           240,187       45,806

    Infrastructure costs       9,821                                      1,307                            18,192        3,355

    Exploration costs              2                                         37                                 8        1,585
                                                                                                            ---

    Total oil and gas
     capital expenditures                            $184,438                                     $33,080            $306,906    $74,397
                                                     ========                                     =======            ========    =======

2017 Operating Guidance

The Company reaffirms the following full-year 2017 guidance as follows:

    --  Capital expenditures for development of oil and gas properties and
        infrastructure of approximately $525 to $570 million, excluding
        leasehold additions
        --  Approximately $510 to $550 million budgeted for drilling and
            completion costs
        --  Approximately $15 to $20 million budgeted for water infrastructure
            construction costs, excluding any potential additions for surface
            acreage
    --  Production of 17,000 to 19,000 Boe/d
        --  50 to 55 gross operated horizontal completions with an approximate
            average lateral length of 7,800' and an approximate average working
            interest of 94%
        --  Production volumes continue to be weighted to the second half of
            2017 as we realize the full benefit of the increased drilling
            program, with projected fourth quarter 2017 production of 26,000 to
            28,000 Boe/d
    --  Production and ad valorem taxes at 6.5% to 7.5% of unhedged production
        revenue
    --  General and administrative expense, excluding equity-based compensation,
        of $28.0 to $30.0 million

The Company is lowering the high end of its 2017 LOE guidance to $3.25 per Boe. The new guidance range is now $2.75 to $3.25 per Boe, a $0.13 per Boe decrease at the mid-point compared to previously reported guidance.

The Company expects third quarter 2017 production to average 20,000 to 20,800 Boe/d, an increase of approximately 5,700 Boe/d, or 39%, at the mid-point compared to second quarter production.

Commodity Hedges

The Company hedges its oil production to reduce cash flow volatility and to support funding of its capital expenditure program. For the last two quarters of 2017, 13,461 Bbl/d of oil are hedged at an average WTI price of $51.34 per barrel. For 2018, 12,920 Bbl/d of oil are hedged at an average WTI price of $52.20 per barrel. In addition, for 2018, the Company has hedges in place for 2,190,000 barrels of oil to hedge the price differential between the Cushing and Midland oil prices at $(1.19) per barrel.

As of August 4, 2017, the Company had the following commodity hedges in place for future production:


    Production Period        Volumes   Weighted Average Price
    -----------------        -------   ----------------------

                              (Bbls)           ($/Bbl)

    Oil Swaps:

    Third quarter 2017       1,084,200                         $51.35

    Fourth quarter 2017      1,392,700                         $51.34

    Remainder 2017 (3Q - 4Q) 2,476,900                         $51.34

    First quarter 2018       1,180,250                         $51.85

    Second quarter 2018      1,139,000                         $51.80

    Third quarter 2018       1,205,200                         $52.38

    Fourth quarter 2018      1,191,400                         $52.75

    Full-Year 2018           4,715,850                         $52.20

    Full-Year 2019           2,372,500                         $51.89

    Oil Basis Swaps:

    Full-Year 2018           2,190,000                        $(1.19)

    Full-Year 2019           1,825,000                        $(1.16)

Conference Call

Jagged Peak will host a conference call and webcast to discuss its second quarter 2017 financial and operating results on Thursday, August 10, 2017 at 9:00 am MDT (11:00 am EDT). The call will be webcast and accessible via the Investor Relations section of the Company's website at www.jaggedpeakenergy.com. To join the live, interactive call, please dial 1-855-327-6838 ten minutes before the scheduled start time (international callers, dial 1-631-891-4304). A telephone replay will be available from 12:00 noon MDT (2:00 pm EDT) on Thursday, August 10, 2017 through Thursday, August 17, 2017 at 10:00 pm MDT (12:00 midnight). To access the replay, dial 1-844-512-2921 (international callers dial, 1-412-317-6671) and enter confirmation code 10003290. A live broadcast of the earnings conference call will also be available via the Company's website at www.jaggedpeakenergy.com under the "Investor Relations" section of the site. A replay will also be available on the website following the call. The presentation material for this conference call will also be available on the Company's website.

Upcoming Investor Events

Chairman, Chief Executive Officer and President, Joe Jaggers, will be presenting at EnerCom's The Oil & Gas Conference on August 14, 2017 at 9:15 am MDT (11:15 am EDT). This presentation will be webcast and available on EnerCom's website through a link on the Company's website at www.jaggedpeakenergy.com. Additionally, Mr. Jaggers will be presenting at the Barclays Global CEO - Energy Power Conference on September 7, 2017 at 9:45 am MDT (11:45 am EDT). This presentation will not be webcast. The presentations used for these events will be available on the Company's website at www.jaggedpeakenergy.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of the federal securities laws. All statements, other than historical facts, that address activities that Jagged Peak assumes, plans, expects, believes, intends or anticipates (and other similar expressions) will, should or may occur in the future are forward-looking statements. Forward-looking statements are based on management's current beliefs, based on currently available information, as to the outcome and timing of future events. Forward-looking statements in this release include, among other things, guidance estimates including all statements under the heading "2017 Operating Guidance" and reaffirmations of production guidance; expected capital expenditures; drilling, completion and development expectations; expected inventory locations; use of IPO proceeds; sufficiency of the Company's liquidity position; ability of Jagged Peak's water infrastructure system to support operations; ability to realize value of Jagged Peak's acreage position; ability to improve well results, increase cash flow and reduce costs; ability to execute on the Company's development plan and increase production; estimates of current net operated production; and the impact and execution of the Company's hedging strategies. These forward-looking statements involve certain risks and uncertainties that could cause the results to differ materially from those expected by the management of Jagged Peak. General risk factors include the availability, proximity and capacity of gathering, processing and transportation facilities; the volatility and level of oil, natural gas, and NGL prices, including any impact on the Company's asset carrying values or reserves arising from price declines; uncertainties inherent in projecting future rates of production or other results from drilling and completion activities; the imprecise nature of estimating oil and gas reserves; uncertainties inherent in projecting future drilling and completion activities, costs or results; the availability of drilling, completion, and operating equipment and services; the risks associated with the Company's commodity price risk management strategy; impact of environmental events, governmental and other third-party responses to such events and Jagged Peak's ability to adequately insure against such events; and other such matters discussed in the "Risk Factors" section of Jagged Peak's 2016 Annual Report on Form 10-K and the Form 10-Q for the quarter ended June 30, 2017, as such risk factors may be updated from time to time in the Company's other periodic reports filed with the Securities and Exchange Commission, which can be obtained free of charge on the Securities and Exchange Commission's web site at http://www.sec.gov. The forward-looking statements contained in this release speak as of the date of this announcement. Although Jagged Peak may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so except as required by applicable securities laws.

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDAX

Adjusted EBITDAX is a non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income (loss) before interest expense, net of capitalized interest, depletion, depreciation, amortization and accretion expense, impairment of oil and natural gas properties, exploration expenses, equity-based compensation expense, income taxes and net gains or losses on derivatives less net cash from derivative settlements. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historical costs of depreciable assets and exploration expenses, none of which are components of Adjusted EBITDAX. Our computation of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

Management believes Adjusted EBITDAX is useful because it allows investors to more effectively evaluate our operating performance and compare the results or our operations from period to period and against our peers without regard to financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book value of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our operating performance.

Adjusted Net Income

Adjusted net income is a performance measure used by management to evaluate financial performance, prior to non-cash gains or losses on derivatives, impairment expense, exploratory dry hole costs, gain or loss on the sale of property, certain one-time items, such as equity-based compensation and income tax expense related to the IPO, and the associated changes in estimated income tax. Management believes adjusted net income is useful because it may enhance investors' ability to assess historical and future financial performance. Adjusted net income should not be considered an alternative to net income, operating income, or any other measure of financial performance presented in accordance with GAAP or as an indicator of our operating performance.

About Jagged Peak Energy Inc.

Jagged Peak Energy Inc. is an independent oil and natural gas company focused on the acquisition and development of unconventional oil and associated liquids-rich natural gas reserves in the Southern Delaware Basin, a sub-basin of the Permian Basin of West Texas.

(1)Adjusted net income and (loss) and adjusted EBITDAX are non-GAAP measures. Please reference the reconciliations to the most directly comparable GAAP measures at the end of this release.


                                                                               Jagged Peak Energy Inc.

                                                                            Selected Operating Highlights

                                                                                     (Unaudited)


                                                     Three Months Ended                        Six Months Ended

                                                          June 30,                                 June 30,

                                                    2017                2016                   2017                2016
                                                    ----                ----                   ----                ----


    Production Data:
    ----------------

    Oil (MBbls)                                    1,079                           415                           1,824      726

    Natural gas (MMcf)                               719                           230                           1,088      388

    NGLs (MBbls)                                     140                            50                             214       86

    Combined volumes (MBoe)                        1,339                           503                           2,220      877

    Daily combined volumes
     (Boe/d)                                      14,714                         5,530                          12,263    4,816


    Average Sales Prices (before the effects of realized hedges):
    -------------------------------------------------------------

    Oil (per Bbl)                                           $44.84                                    $42.44            $46.67  $37.03

    Natural gas (per Mcf)                           2.56                          1.91                            2.53     1.85

    NGLs (per Bbl)                                 19.00                         15.50                           19.56    14.01

    Combined (per Boe)                             39.50                         37.40                           41.49    32.86


    Average Sales Prices (after the effects of realized hedges):
    ------------------------------------------------------------

    Oil (per Bbl)                                           $46.29                                    $40.46            $46.95  $35.90

    Natural gas (per Mcf)                           2.56                          1.91                            2.53     1.85

    NGLs (per Bbl)                                 19.00                         15.50                           19.56    14.01

    Combined (per Boe)                             40.67                         35.77                           41.71    31.93


    Average Operating Costs (per Boe):
    ----------------------------------

    Lease operating expenses                                 $2.90                                     $2.33             $2.48   $3.39

    Gathering,
     transportation and
     processing expense                             0.49                          0.43                            0.47     0.42

    Production and ad
     valorem tax expenses                           2.64                          2.25                            2.78     2.09

    Depreciation, depletion,
     amortization and
     accretion expense                             16.66                         19.01                           16.39    20.85

    General and
     administrative expense
     (before equity-based
     compensation expense)                          5.56                          4.31                            5.42     6.28


                                                   Jagged Peak Energy Inc.

                                      Condensed Consolidated and Combined Balance Sheets

                                                         (Unaudited)



                                                           June 30, 2017               December 31, 2016
                                                           -------------               -----------------

                                                                     (in thousands)

    Assets:

               Cash and cash equivalents                                    $86,996                       $11,727

               Other current assets                              38,637                           13,739

               Property and equipment, net                      747,276                          476,593

               Other noncurrent assets                           15,844                           16,333
                                                               ------

               Total assets                                                $888,753                      $518,392
                                                                  ===


    Liabilities and Stockholders' / Members' Equity:

               Current liabilities                                         $105,653                       $56,421

               Long-term debt                                         -                         132,000

               Deferred income taxes                            103,637                                -

               Other long-term liabilities                          899                            3,859

               Stockholders' / Members' equity                  678,564                          326,112
                                                              -------

                Total liabilities and stockholders' /
                members' equity                                            $888,753                      $518,392
                                                                  ===


                                                                                       Jagged Peak Energy Inc.

                                                                    Condensed Consolidated and Combined Statements of Operations

                                                                                             (Unaudited)


                                                   Three Months Ended                                    Six Months Ended

                                                        June 30,                                             June 30,

                                                 2017                    2016                      2017                    2016
                                                 ----                    ----                      ----                    ----

                                                               (in thousands, except per share amounts)

    Revenues

    Oil, natural gas and NGL
     sales                                               $52,892                                          $18,824                             $92,092       $28,806

    Other operating revenues                      159                                 512                                  347                     775
                                                  ---                                 ---                                  ---                     ---

    Total revenues                             53,051                              19,336                               92,439                  29,581
                                               ------                              ------                               ------                  ------

    Operating Expenses

    Lease operating expenses                    3,890                               1,173                                5,500                   2,969

    Gathering and
     transportation expenses                      655                                 218                                1,047                     368

    Production and ad valorem
     taxes                                      3,537                               1,131                                6,177                   1,832

    Exploration                                     2                               1,192                                    8                   2,474

    Depletion, depreciation,
     amortization and
     accretion                                 22,311                               9,566                               36,373                  18,278

    Impairment of unproved oil
     and natural gas
     properties                                   101                                  64                                  108                     310

    Other operating expenses                       47                                 214                                  182                     398

    General and administrative
     (before equity-based
     compensation)                              7,445                               2,171                               12,032                   5,503

    General and
     administrative, equity-
     based compensation                        10,775                                   -                             419,739                       -
                                               ------                                 ---                             -------                     ---

    Total operating expenses                   48,763                              15,729                              481,166                  32,132
                                               ------                              ------                              -------                  ------

    Income (Loss) from
     Operations                                 4,288                               3,607                            (388,727)                 (2,551)
                                                -----                               -----                             --------                  ------

    Other Income and Expense

    Gain (loss) on commodity
     derivatives                               26,573                             (8,877)                              43,615                 (9,936)

    Interest expense and other                  (189)                              (479)                               (729)                  (712)

    Total other income (loss)                  26,384                             (9,356)                              42,886                (10,648)
                                               ------                              ------                               ------                 -------

    Income (Loss) before
     Income Taxes                              30,672                             (5,749)                           (345,841)                (13,199)

    Income tax expense                         14,269                                   -                             103,637                       -
                                               ------                                 ---                             -------                     ---

    Net Income (Loss)                                    $16,403                                         $(5,749)                         $(449,478)    $(13,199)
                                                         =======                                          =======                           =========      ========


    Net Income (Loss)
     attributable to Jagged
     Peak Energy LLC
     (predecessor)                                  $          -                                        $(5,749)                         $(375,476)    $(13,199)

    Net Income (Loss)
     attributable to Jagged
     Peak Energy Inc.
     Stockholders                              16,403                                   -                            (74,002)                      -

    Net Income (Loss)                                    $16,403                                         $(5,749)                         $(449,478)    $(13,199)
                                                         =======                                          =======                           =========      ========


    Net income (loss) attributable to Jagged
     Peak Energy Inc. Stockholders per common
     share:

    Basic                                                  $0.08                                                                 $(0.35)

    Diluted                                                $0.08                                                                 $(0.35)


    Weighted-average common shares
     outstanding:

    Basic                                     212,932                                                     212,934

    Diluted                                   213,051                                                     212,934


                                                                                         Jagged Peak Energy Inc.

                                                                            Consolidated and Combined Statements of Cash Flows

                                                                                               (Unaudited)


                                                         Three Months Ended                                   Six Months Ended

                                                              June 30,                                            June 30,

                                                       2017                   2016                      2017                    2016
                                                       ----                   ----                      ----                    ----

                                                                                 (in thousands)

    Cash Flows from Operating Activities

    Net income (loss)                                          $16,403                                        $(5,749)               $(449,478)   $(13,199)

    Adjustments to reconcile to net cash provided
     by operating activities:

    Depletion, depreciation,
     amortization and accretion
     expense                                         22,311                              9,566                               36,373        18,278

    Management incentive unit
     advance                                              -                          (14,712)                                   -     (14,711)

    Impairment of unproved oil and
     natural gas properties                             101                                 64                                  108           310

    Exploratory dry hole costs                            -                             1,192                                    -        1,192

    Amortization of debt issuance
     costs                                              143                                 56                                  260            87

    Deferred income taxes                            14,269                                  -                             103,637             -

    Equity-based compensation                        10,775                                  -                             419,739             -

    (Gain) Loss on commodity
     derivatives                                   (26,573)                             8,877                             (43,615)        9,936

    Net cash receipts (payments) on
     settled derivatives                              1,567                              (822)                                 496         (822)

    Other                                              (44)                              (39)                                (83)         (79)

    Change in operating assets and liabilities:

    Accounts receivable and other
     current assets                                 (2,385)                           (3,082)                             (8,710)        (810)

    Other assets                                      (119)                                 1                                (119)           11

    Accounts payable and accrued
     liabilities                                      1,856                                888                                1,397         1,111
                                                      -----                                ---                                -----         -----

    Net cash provided by operating
     activities                                      38,304                            (3,760)                              60,005         1,304
                                                     ------                             ------                               ------         -----

    Cash Flows from Investing Activities

    Leasehold and acquisitions
     costs                                         (27,340)                           (6,945)                            (52,968)     (23,934)

    Development of oil and natural
     gas properties                               (120,919)                          (36,873)                           (195,212)      (54,155)

    Other capital expenditures                        (693)                           (1,014)                             (1,456)      (1,691)

    Proceeds from sale of oil and
     natural gas properties                               -                                 -                                   -            -
                                                        ---                               ---                                 ---          ---

    Net cash used in investing
     activities                                   (148,952)                          (44,832)                           (249,636)      (79,780)
                                                   --------                            -------                             --------       -------

    Cash Flows from Financing Activities

    Proceeds from issuance of
     common stock in IPO, net of
     underwriting fees                                    -                                 -                             401,625             -

    Proceeds from common units
     issued                                               -                            14,942                                    -       31,542

    Proceeds from senior secured
     revolving credit facility                            -                            25,000                               10,000        40,000

    Repayment of senior secured
     revolving credit facility                            -                                 -                           (142,000)             -

    Debt issuance costs                               (421)                             (712)                             (1,421)        (738)

    Costs related to initial public
     offering                                         (656)                                 -                             (3,216)            -

    Employee tax withholding for
     settlement of equity
     compensation awards                               (88)                                 -                                (88)            -
                                                        ---                                ---                                 ---           ---

    Net cash provided by financing
     activities                                     (1,165)                            39,230                              264,900        70,804
                                                     ------                             ------                              -------        ------

    Net Change in Cash and Cash
     Equivalents                                  (111,813)                           (9,362)                              75,269       (7,672)

    Cash and Cash Equivalents,
     Beginning of Period                            198,809                             15,855                               11,727        14,165
                                                    -------                             ------                               ------        ------

    Cash and Cash Equivalents, End
     of Period                                                 $86,996                                          $6,493                   $86,996       $6,493
                                                               =======                                          ======                   =======       ======


                                                                                                 Jagged Peak Energy Inc.

                                                                                Reconciliation of Adjusted Net Income and Adjusted EBITDAX

                                                                                                       (Unaudited)


    The following tables provide reconciliations of the GAAP financial measure of Net Income (Loss) to the non-GAAP financial measures of Adjusted Net Income (Loss) and Adjusted EBITDAX. A description of the reconciliations
     is included in the section titled "Reconciliation of Non-GAAP Financial Measures."




                                                     Three Months Ended                                Six Months Ended

                                                          June 30,                                         June 30,

                                                     2017                    2016                      2017                    2016
                                                     ----                    ----                      ----                    ----

                                                                                (in thousands)

    Adjusted Net Income (Loss)

    Net Income (Loss)                                        $16,403                                         $(5,749)                                        $(449,478)                                       $(13,199)

    Adjustments to reconcile to Adjusted Net
     Income

    Impairment of unproved
     oil and natural gas
     properties                                       101                                  64                                  108                                    310

    Exploratory dry hole
     costs                                              -                              1,192                                    -                                 1,192

    (Gain) loss on commodity
     derivatives, net, less
     net cash from
     derivative settlements                      (25,006)                              8,055                             (43,119)                                 9,114

    Equity-based
     compensation expense
     related to allocated
     management incentive
     units (1)                                      9,513                                   -                             418,477                                      -

    Deferred income tax
     expense recorded in
     connection with the
     Company's initial
     public offering                                    -                                  -                              79,106                                      -

    Income tax effect for
     the above items                                8,844                                   -                              15,272                                      -

    Adjusted Net Income
     (Loss)                                                   $9,855                                           $3,562                                            $20,366                                         $(2,583)
                                                              ======                                           ======                                            =======                                          =======


    Adjusted Net Income
     (Loss) per basic common
     share                                                     $0.05                                                                    $0.10

    Adjusted Net Income
     (Loss) per diluted
     common share                                              $0.05                                                                    $0.10


    Basic common shares                           212,932                                                     212,934

    Diluted common shares                         213,051                                                     212,934


    Adjusted EBITDAX

    Net Income (Loss)                                        $16,403                                         $(5,749)                                        $(449,478)                                       $(13,199)

    Adjustments to reconcile to Adjusted
     EBITDAX

    Interest expense, net of
     capitalized                                      432                                 479                                1,143                                    712

    Income tax expense
     (benefit)                                     14,269                                   -                             103,637                                      -

    Depletion, depreciation,
     amortization and
     accretion                                     22,311                               9,566                               36,373                                 18,278

    Impairment of unproved
     oil and natural gas
     properties                                       101                                  64                                  108                                    310

    Exploration expenses                                2                               1,192                                    8                                  2,474

    (Gain) loss on commodity
     derivatives, net, less
     net cash from
     derivative settlements                      (25,006)                              8,055                             (43,119)                                 9,114

    Equity-based
     compensation expense
     (2)                                          10,775                                   -                             419,739                                      -
                                                   ------                                 ---                             -------                                    ---

    Adjusted EBITDAX                                         $39,287                                          $13,607                                            $68,411                                          $17,689
                                                             =======                                          =======                                            =======                                          =======


    (1) -In connection with the
     Company's initial public
     offering, management incentive
     units were converted to common
     stock. A portion of this common
     stock was transferred to JPE
     Management Holdings LLC and
     became subject to the terms and
     conditions of the amended and
     restated JPE Management Holdings
     LLC limited liability company
     agreement.  The compensation
     expense related to these shares
     is recognized ratably as they
     vest. Only compensation expense
     related to management incentive
     units allocated at the time of
     the IPO is excluded from the
     calculation of adjusted net
     income.


    (2) - Equity-based compensation
     expense for the second quarter of
     2017 includes $9.9 million
     related to management incentive
     units that converted to common
     stock in connection with the
     Company's initial public offering
     and $0.8 million related to
     equity awards issued under the
     Company's long-term incentive
     plan.

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SOURCE Jagged Peak Energy Inc.