Yuma Energy, Inc. Announces it is Actively Seeking Strategic Alternatives, Provides an Update to its Liquidity and Operations, and Reports First Quarter 2018 Financial Results
Yuma Energy, Inc. Announces it is Actively Seeking Strategic Alternatives, Provides an Update to its Liquidity and Operations, and Reports First Quarter 2018 Financial Results
HOUSTON, May 11, 2018 /PRNewswire/ -- Yuma Energy, Inc. (NYSE American: YUMA) (the "Company" or "Yuma") today announced that it is actively seeking strategic alternatives and provided information related to its liquidity and operations. The Company also reported its financial results for the quarter ended March 31, 2018.
Strategic Alternatives
Yuma is currently exploring strategic alternatives in order to enhance and maximize shareholder value. These strategic alternatives may include, but are not limited to, a business combination, a merger, sale of assets, and possible capital market transactions. Yuma will thoroughly evaluate all opportunities and third-party proposals, if any, and will aggressively pursue options which are intended to add incremental shareholder value relative to its continued standalone activities.
Liquidity
Due to operating losses the Company sustained during recent quarters, which were partially a result of several events outside the reasonable control of the Company, including the suspension of production from several wells for a period of time and other associated factors, at March 31, 2018, the Company was not in compliance with its total debt to EBITDAX covenant for the trailing four quarter period under its credit facility. In addition, due to this non-compliance and the Company's anticipated non-compliance at June 30, 2018, the Company classified its bank debt as a current liability in its consolidated financial statements as of and for the three months ended March 31, 2018. On May 8, 2018, the Company received a waiver from its lenders to its compliance with the fiscal period total debt to EBITDAX for the trailing four quarter period financial ratio covenant for the period ended March 31, 2018, as long as it does not exceed 3.75 to 1.00.
As of March 31, 2018, the Company had outstanding borrowings of $27.05 million under its credit facility, and its total borrowing base was $40.5 million, leaving $13.45 million of undrawn borrowing base. As of May 8, 2018, the total borrowing base under the credit facility was reduced to $35.0 million. Since March 31, 2018, the Company has borrowed an additional $7.2 million for working capital, leaving $750,000 of undrawn borrowing base as of the date hereof.
A breach in the future of any of the terms and conditions of the credit facility or a breach of the financial covenants thereunder could result in acceleration of the Company's indebtedness, in which case the debt would become immediately due and payable. The Company currently anticipates non-compliance with various financial covenants at June 30, 2018.
The Company has initiated several strategic alternatives to remedy its limited liquidity, its debt covenant compliance issues, and to provide it with additional working capital to develop its existing assets. These may include, but are not limited to, reducing or eliminating capital expenditures previously planned for 2018; entering into commodity derivatives for a significant portion of its anticipated production for 2018; reducing general and administrative expenses; selling non-core assets; seeking merger and acquisition related opportunities; and potentially raising proceeds from capital markets transactions, including the sale of debt or equity securities. There can be no assurance that the exploration of strategic alternatives will result in a transaction.
The significant risks and uncertainties described above raise substantial doubt about the Company's ability to continue as a going concern. The Company has prepared its consolidated financial statements for the three months ended March 31, 2018 on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The Company's consolidated financial statements for the three months ended March 31, 2018 do not include any adjustments that might result from the outcome of the going concern uncertainty.
Operations Update
In 2017, the Company entered the Permian Basin through a joint venture with two privately held energy companies and established an Area of Mutual Interest ("AMI") covering approximately 33,280 acres in Yoakum County, Texas, located in the Northwest Shelf of the Permian Basin. The primary target within the AMI is the San Andres formation, which has been one of the largest producing formations in Texas to date. As of May 1, 2018, the Company held a 62.5% working interest in approximately 4,823 gross acres (3,014 net acres) within the AMI. In November, 2017, the Company spudded a salt water disposal well, the Jameson SWD #1. Upon completion of the salt water disposal well, the drilling rig was moved to the Company's State 320 #1H horizontal San Andres well, which was subsequently drilled and completed. The Company opened the well on March 1, 2018 to begin the dewatering process and establish production. As of May 6, 2018, the well was producing 31 barrels of oil, 89 Mcf of natural gas, and 3,908 barrels of water per day. While significant water production is typical and was expected from the well, early production rates have not met management's pre-drill expectations. The Company will continue to evaluate well performance and the commerciality of the prospect area, but given the well performance to date, the ability to establish commercial production in the prospect area is uncertain at this time. As of March 31, 2018, the salt water disposal well and the State 320 #1H well were classified as unproved properties within the Company's consolidated financial statements.
First Quarter 2018 Financial Results
Production
The following table presents the net quantities of oil, natural gas and natural gas liquids produced and sold by the Company for the three months ended March 31, 2018 and 2017, and the average sales price per unit sold.
Three Months Ended March 31, ------------------- 2018 2017 ---- ---- Production volumes: Crude oil and condensate (Bbls) 47,157 76,397 Natural gas (Mcf) 633,440 899,427 Natural gas liquids (Bbls) 25,243 33,474 ------ ------ Total (Boe) (1) 177,973 259,776 ======= ======= Average prices realized: Crude oil and condensate (per Bbl) $65.02 $49.95 Natural gas (per Mcf) $2.83 $2.84 Natural gas liquids (per Bbl) $31.22 $23.15
(1) Barrels of oil equivalent have been calculated on the basis of six thousand cubic feet (Mcf) of natural gas equal to one barrel of oil equivalent (Boe).
Revenues
The following table presents the Company's revenues for the three months ended March 31, 2018 and 2017.
Three Months Ended March 31, ---------------------------- 2018 2017 ---- ---- Sales of natural gas and crude oil: Crude oil and condensate $3,066,258 $3,815,932 Natural gas 1,791,251 2,553,443 Natural gas liquids 788,027 775,049 ------- ------- Total revenues $5,645,536 $7,144,424 ========== ==========
Expenses
The Company's lease operating expenses ("LOE") and LOE per Boe for the three months ended March 31, 2018 and 2017, are set forth below:
Three Months Ended March 31, ---------------------------- 2018 2017 ---- ---- Lease operating expenses $1,665,320 $1,697,908 Severance, ad valorem taxes and marketing 960,448 963,356 ------- ------- Total LOE $2,625,768 $2,661,264 ========== ========== LOE per Boe $14.75 $10.24 LOE per Boe without severance, ad valorem taxes and marketing $9.36 $6.54
Commodity Derivative Instruments
Commodity derivative instruments open as of March 31, 2018 are provided below. Natural gas prices are NYMEX Henry Hub prices, and crude oil prices are NYMEX West Texas Intermediate.
2018 2019 Settlement Settlement (1) ---------- ------------- NATURAL GAS (MMBtu): Swaps Volume 1,245,893 373,906 Price $3.00 $3.00 CRUDE OIL (Bbls): Swaps Volume 140,818 156,320 Price $53.17 $53.77
(1) Represents volumes through March 2019.
About Yuma Energy, Inc.
Yuma Energy, Inc., a Delaware corporation, is an independent Houston-based exploration and production company focused on acquiring, developing and exploring for conventional and unconventional oil and natural gas resources. Historically, the Company's operations have focused on onshore properties located in central and southern Louisiana and southeastern Texas where it has a long history of drilling, developing and producing both oil and natural gas assets. More recently, the Company has begun acquiring acreage in Yoakum County, Texas, with plans to explore and develop oil and natural gas assets in the Permian Basin. Finally, the Company has operated positions in Kern County, California, and non-operated positions in the East Texas Woodbine and the Bakken Shale in North Dakota. Its common stock is listed on the NYSE American under the trading symbol "YUMA."
Forward-Looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects," "believes," "intends," "anticipates," "plans," "estimates," "potential," "possible," or "probable" or statements that certain actions, events or results "may," "will," "should," or "could" be taken, occur or be achieved. The forward-looking statements include statements about future operations, and estimates of reserve and production volumes. Forward-looking statements are based on current expectations and assumptions and analyses made by the Company in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances. However, whether actual results and developments will conform with expectations is subject to a number of risks and uncertainties, including but not limited to: our limited liquidity; the risks of the oil and natural gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas); risks and uncertainties involving geology of oil and natural gas deposits; the uncertainty of reserve estimates; revisions to reserve estimates as a result of changes in commodity prices; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather; declines in oil and natural gas prices; inability of management to execute its plans to meet its goals, shortages of drilling equipment, oil field personnel and services, unavailability of gathering systems, pipelines and processing facilities and the possibility that government policies may change. The Company's annual report on Form 10-K for the year ended December 31, 2017, quarterly reports on Form 10-Q, recent current reports on Form 8-K, and other SEC filings discuss some of the important risk factors identified that may affect its business, results of operations, and financial condition. The Company undertakes no obligation to revise or update publicly any forward-looking statements, except as required by law.
Yuma Energy, Inc. CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 2018 2017 ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents $101,850 $137,363 Accounts receivable, net of allowance for doubtful accounts: Trade 3,569,760 4,496,316 Officer and employees - 53,979 Other 536,243 1,004,479 Prepayments 837,877 976,462 Other deferred charges 406,881 347,490 ------- ------- Total current assets 5,452,611 7,016,089 --------- --------- OIL AND GAS PROPERTIES (full cost method): Proved properties 494,700,559 494,216,531 Unproved properties - not subject to amortization 9,127,056 6,794,372 --------- --------- 503,827,615 501,010,903 Less: accumulated depreciation, depletion and amortization (423,342,487) (421,165,400) ------------ ------------ Net oil and gas properties 80,485,128 79,845,503 ---------- ---------- OTHER PROPERTY AND EQUIPMENT: Land, buildings and improvements 1,600,000 1,600,000 Other property and equipment 2,845,459 2,845,459 --------- --------- 4,445,459 4,445,459 Less: accumulated depreciation and amortization (1,449,769) (1,409,535) ---------- ---------- Net other property and equipment 2,995,690 3,035,924 --------- --------- OTHER ASSETS AND DEFERRED CHARGES: Deposits 467,592 467,592 Other noncurrent assets 79,997 270,842 ------ ------- Total other assets and deferred charges 547,589 738,434 ------- ------- TOTAL ASSETS $89,481,018 $90,635,950 =========== ===========
Yuma Energy, Inc. CONSOLIDATED BALANCE SHEETS - CONTINUED (Unaudited) March 31, December 31, 2018 2017 ---- ---- LIABILITIES AND EQUITY CURRENT LIABILITIES: Current maturities of debt $27,424,499 $651,124 Accounts payable, principally trade 13,778,740 11,931,218 Commodity derivative instruments 1,476,071 903,003 Asset retirement obligations 88,721 277,355 Other accrued liabilities 1,765,817 2,295,438 --------- --------- Total current liabilities 44,533,848 16,058,138 ---------- ---------- LONG-TERM DEBT - 27,700,000 --- ---------- OTHER NONCURRENT LIABILITIES: Asset retirement obligations 10,352,150 10,189,058 Commodity derivative instruments 485,234 336,406 Deferred rent 281,852 290,566 Employee stock awards 239,095 191,110 ------- ------- Total other noncurrent liabilities 11,358,331 11,007,140 ---------- ---------- COMMITMENTS AND CONTINGENCIES (Notes 2 and 15) EQUITY Series D convertible preferred stock ($0.001 par value, 7,000,000 authorized, 1,937,262 issued and outstanding as of March 31, 2018, and 1,904,391 issued and outstanding as of December 31, 2017) 1,937 1,904 Common stock ($0.001 par value, 100 million shares authorized, 23,230,169 outstanding as of March 31, 2018 and 22,661,758 outstanding as of December 31, 2017) 23,230 22,662 Additional paid-in capital 56,728,467 55,064,685 Treasury stock at cost (369,238 shares as of March 31, 2018 and 13,343 shares as of December 31, 2017) (434,557) (25,278) Accumulated earnings (deficit) (22,730,238) (19,193,301) ----------- ----------- Total equity 33,588,839 35,870,672 ---------- ---------- TOTAL LIABILITIES AND EQUITY $89,481,018 $90,635,950 =========== ===========
Yuma Energy, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, ---------------------------- 2018 2017 ---- ---- REVENUES: Sales of natural gas and crude oil $5,645,536 $7,144,424 ---------- ---------- EXPENSES: Lease operating and production costs 2,625,768 2,661,264 General and administrative - stock-based compensation 296,293 51,735 General and administrative - other 1,749,237 2,176,002 Depreciation, depletion and amortization 2,217,321 3,140,940 Asset retirement obligation accretion expense 142,940 138,569 Bad debt expense 65,808 - ------ --- Total expenses 7,097,367 8,168,510 --------- --------- LOSS FROM OPERATIONS (1,451,831) (1,024,086) ---------- ---------- OTHER INCOME (EXPENSE): Net gains (losses) from commodity derivatives (1,251,260) 3,556,783 Interest expense (466,292) (496,091) Gain on other property and equipment - 555,642 Other, net (3,537) 36,408 ------ ------ Total other income (expense) (1,721,089) 3,652,742 ---------- --------- INCOME (LOSS) BEFORE INCOME TAXES (3,172,920) 2,628,656 Income tax expense - 26,531 --- ------ NET INCOME (LOSS) (3,172,920) 2,602,125 PREFERRED STOCK: Dividends paid in kind 364,017 339,610 ------- ------- NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $(3,536,937) $2,262,515 =========== ========== INCOME (LOSS) PER COMMON SHARE: Basic ($0.16) $0.19 Diluted ($0.16) $0.16 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: Basic 22,813,130 12,211,256 Diluted 22,813,130 14,056,170
Yuma Energy, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ---------------------------- 2018 2017 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Reconciliation of net income (loss) to net cash provided by (used in) operating activities: Net income (loss) $(3,172,920) $2,602,125 Depreciation, depletion and amortization of property and equipment 2,217,321 3,140,940 Amortization of debt issuance costs 184,733 81,843 Deferred rent liability, net 33,117 - Stock-based compensation expense 296,293 51,735 Settlement of asset retirement obligations (147,122) - Asset retirement obligation accretion expense 142,940 138,569 Bad debt expense 65,808 - Net (gains) losses from commodity derivatives 1,251,260 (3,556,783) Gain on sales of fixed assets - (555,642) Loss on write-off of liabilities net of assets 3,631 - Changes in assets and liabilities: (Increase) decrease in accounts receivable 879,333 (795,740) Decrease in prepaids, deposits and other assets 138,585 306,021 (Decrease) increase in accounts payable and other current and non-current liabilities 2,507,831 (461,542) --------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 4,400,810 951,526 --------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures for oil and gas properties (3,507,005) (2,053,826) Proceeds from sale of oil and gas properties 1,000,000 641,056 Derivative settlements (529,364) 98,700 -------- ------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,036,369) (1,314,070) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings on senior credit facility 6,350,000 - Repayment of borrowings on senior credit facility (7,000,000) - Repayments of borrowings -insurance financing (276,625) (255,026) Debt issuance costs - (76,452) Shelf registration costs (64,050) - Treasury stock repurchases (409,279) (4,170) -------- ------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,399,954) (335,648) ---------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (35,513) (698,192) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 137,363 3,625,686 ------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $101,850 $2,927,494 ======== ========== Supplemental disclosure of cash flow information: Interest payments (net of interest capitalized) $145,871 $264,542 Interest capitalized $115,541 $44,550 Supplemental disclosure of significant non-cash activity: (Increase) decrease in capital expenditures financed by accounts payable $168,934 $(1,434,132)
CONTACT: James J. Jacobs, Executive Vice President, Treasurer and Chief Financial Officer, Yuma Energy, Inc., 1177 West Loop South, Suite 1825, Houston, TX 77027, Telephone: (713) 968-7000
SOURCE Yuma Energy, Inc.