Yuma Energy, Inc. Provides an Update to its Liquidity and Operations, and Reports Second Quarter 2018 Financial Results
HOUSTON, Aug. 9, 2018 /PRNewswire/ -- Yuma Energy, Inc. (NYSE American: YUMA) (the "Company" or "Yuma") today provided information related to its liquidity and operations. The Company also reported its financial results for the quarter ended June 30, 2018.
Liquidity
As previously reported, the Company initiated several strategic alternatives to remedy its limited liquidity (defined as cash on hand and undrawn borrowing base), its financial covenant compliance issues, and to provide it with additional working capital to develop its existing assets. During the second quarter, the Company entered into an Asset Purchase and Sale Agreement on May 21, 2018 regarding its Kern County, California properties, including the sale of all of the Company's oil and gas properties, fee properties, land, buildings, other property and equipment in consideration of $4.7 million in gross proceeds and the buyer's assumption of certain plugging and abandonment liabilities. The transaction is scheduled to close by August 31, 2018. Upon the closing of the transaction, it is anticipated that the majority of the proceeds will be applied to the repayment of borrowings under the Company's credit facility. In addition, the Company has reduced its personnel by eight employees since December 31, 2017, a 24% decrease, including five positions that were eliminated on June 30, 2018. This brings the Company's headcount to 26 employees as of June 30, 2018. It should also be noted that, during the second quarter of 2018, the Company took additional steps to further reduce its general and administrative costs by reducing subscriptions, consultants and other non-essential services, as well as eliminating certain of its capital expenditures planned for 2018.
Additionally, the Company plans to take further steps to remedy its limited liquidity which may include, but are not limited to, further reducing or eliminating capital expenditures; entering into additional commodity derivatives for a portion of the Company's anticipated production; further reducing general and administrative expenses; selling certain 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 or otherwise remedy the Company's limited liquidity.
The Company has borrowings under its credit facility which require, among other things, compliance with certain financial ratios and covenants. Due to operating losses the Company sustained during recent quarters, at June 30, 2018 the Company was not in compliance under the credit facility with its (i) total debt to EBITDAX covenant for the trailing four quarter period, (ii) current ratio covenant, (iii) EBITDAX to interest expense covenant for the trailing four quarter period, and (iv) the liquidity covenant requiring the Company to maintain unrestricted cash and borrowing base availability of at least $4.0 million. In addition, due to this non-compliance, the Company classified its entire bank debt as a current liability in its financial statements as of June 30, 2018. On July 31, 2018, the Borrowers entered into the Waiver and Third Amendment to Credit Agreement (the "Third Amendment") with the Lender. Pursuant to the Third Amendment, effective as of June 30, 2018, the Borrowers were granted a waiver for non-compliance from the liquidity covenant to have cash and cash equivalent investments together with borrowing base availability under the Credit Agreement of at least $4.0 million. In addition, as part of the Third Amendment, the Lenders requested that the Borrowers provide weekly cash flow forecasts and a monthly accounts payable report to the Lenders. The Third Amendment also provides for a redetermination of the borrowing base on August 15, 2018.
As of June 30, 2018, the Company had outstanding borrowings of $35.0 million under its credit facility, and its total borrowing base was $35.0 million, leaving no undrawn borrowing base. Due to drilling activities and other factors, the Company had a working capital deficit of $40.93 million (inclusive of the Company's outstanding debt under its credit facility) and a loss from operations of $2.90 million for the six months ended June 30, 2018.
These breaches of the terms and conditions of the Credit Agreement could result in acceleration of the Company's indebtedness, in which case the debt would become immediately due and payable thereby giving its lenders various rights and remedies, including foreclosure.
The significant risks and uncertainties described above raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements have been prepared 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 consolidated financial statements 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 June 30, 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 drilled a salt water disposal well, the Jameson SWD #1. In December 2017, the Company spudded the State 320 #1H horizontal San Andres well, which was subsequently completed in February 2018. The Company opened the well on March 1, 2018 and placed the well on production. As of July 17, 2018, the well has produced a total of 1,708 barrels of oil, 12,748 Mcf of gas, and 421,603 barrels of water. The well is currently shut-in pending evaluation of the commerciality and future development of the prospect area. Given the well performance to date, the ability to establish commercial production in the prospect area is uncertain at this time.
Second 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 and six months ended June 30, 2018 and 2017, and the average sales price per unit sold.
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2018 2017 2018 2017
---- ---- ---- ----
Production
volumes:
Crude oil and
condensate
(Bbls) 47,322 66,242 94,479 142,640
Natural gas
(Mcf) 538,241 786,111 1,171,681 1,685,538
Natural gas
liquids (Bbls) 28,974 35,092 54,217 68,566
------ ------ ------ ------
Total (Boe) (1) 166,003 232,353 343,976 492,129
======= ======= ======= =======
Average prices
realized:
Crude oil and
condensate
(per Bbl) $67.69 $47.14 $66.36 $48.65
Natural gas
(per Mcf) $3.30 $3.29 $3.04 $3.05
Natural gas
liquids (per
Bbl) $29.11 $24.05 $30.09 $23.61
(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 and six months ended June 30, 2018 and 2017.
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2018 2017 2018 2017
---- ---- ---- ----
Sales of
natural gas
and crude oil:
Crude oil and
condensate $3,203,260 $3,122,848 $6,269,517 $6,938,780
Natural gas 1,775,919 2,587,968 3,567,170 5,141,410
Natural gas
liquids 843,398 843,888 1,631,426 1,618,938
------- ------- --------- ---------
Total revenues $5,822,577 $6,554,704 $11,468,113 $13,699,128
========== ========== =========== ===========
Expenses
The Company's lease operating expenses ("LOE") and LOE per Boe for the three and six months ended June 30, 2018 and 2017, are set forth below:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2018 2017 2018 2017
---- ---- ---- ----
Lease operating
expenses $1,890,809 $1,844,896 $3,556,129 $3,542,804
Severance, ad
valorem taxes
and marketing 905,016 1,214,228 1,865,464 2,177,584
------- --------- --------- ---------
Total LOE $2,795,825 $3,059,124 $5,421,593 $5,720,388
========== ========== ========== ==========
LOE per Boe $16.84 $13.17 $15.76 $11.62
LOE per Boe
without
severance, ad
valorem taxes
and marketing $11.39 $7.94 $10.34 $7.20
Commodity Derivative Instruments
Commodity derivative instruments open as of June 30, 2018 are provided below. Natural gas prices are NYMEX Henry Hub prices, and crude oil prices are NYMEX West Texas Intermediate.
2018 2019 2020
Settlement Settlement Settlement
---------- ---------- ----------
NATURAL GAS (MMBtu):
Swaps
Volume 887,533 1,660,297 1,095,430
Price $2.97 $2.75 $2.68
CRUDE OIL (Bbls):
Swaps
Volume 89,995 156,320
Price $53.17 $53.77
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. In addition, during 2017 the Company began 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 and the Company's ability to repay outstanding loans when due; the Company's ability to continue as a going concern; reduction in the borrowing base of the Company's credit facility; 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)
June 30, December 31,
2018 2017
---- ----
ASSETS
CURRENT ASSETS:
Cash
and
cash
equivalents $2,348,627 $137,363
Accounts receivable, net of allowance
for doubtful accounts:
Trade 3,522,107 4,496,316
Officer
and
employees 7,781 53,979
Other 441,795 1,004,479
Prepayments 622,843 976,462
Other
deferred
charges 387,108 347,490
------- -------
Total
current
assets 7,330,261 7,016,089
--------- ---------
OIL AND GAS PROPERTIES (full cost
method):
Proved
properties 504,060,185 494,216,531
Unproved
properties
-
not
subject
to
amortization 534,627 6,794,372
------- ---------
504,594,812 501,010,903
Less:
accumulated
depreciation,
depletion
and
amortization (425,547,424) (421,165,400)
------------ ------------
Net
oil
and
gas
properties 79,047,388 79,845,503
---------- ----------
OTHER PROPERTY AND EQUIPMENT:
Assets
held
for
sale 2,309,243 -
Land,
buildings
and
improvements - 1,600,000
Other
property
and
equipment 1,793,397 2,845,459
--------- ---------
4,102,640 4,445,459
Less:
accumulated
depreciation
and
amortization (1,324,152) (1,409,535)
---------- ----------
Net
other
property
and
equipment 2,778,488 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 $89,703,726 $90,635,950
=========== ===========
Yuma Energy, Inc.
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Unaudited)
June 30, December 31,
2018 2017
---- ----
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of debt $35,094,226 $651,124
Accounts payable, principally
trade 8,904,037 11,931,218
Commodity derivative
instruments 2,613,690 903,003
Asset retirement obligations 88,722 277,355
Other accrued liabilities 1,555,117 2,295,438
--------- ---------
Total current liabilities 48,255,792 16,058,138
---------- ----------
LONG-TERM DEBT - 27,700,000
--- ----------
OTHER NONCURRENT LIABILITIES:
Asset retirement obligations 10,492,311 10,189,058
Commodity derivative
instruments 783,338 336,406
Deferred rent 272,506 290,566
Employee stock awards 143,961 191,110
------- -------
Total other noncurrent
liabilities 11,692,116 11,007,140
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 15)
EQUITY
Series D convertible preferred stock
($0.001 par value, 7,000,000 authorized,
1,971,072 issued and outstanding as of
June 30, 2018, and 1,904,391 issued and
outstanding as of December 31, 2017)
1,971 1,904
Common stock
($0.001 par value, 100 million shares
authorized, 23,242,969 outstanding as of
June 30, 2018 and 22,661,758 outstanding
as of December 31, 2017)
23,243 22,662
Additional paid-in capital 57,304,534 55,064,685
Treasury stock at cost (380,069 shares as
of June 30, 2018 and 13,343 shares as of
December 31, 2017)
(438,890) (25,278)
Accumulated earnings (deficit) (27,135,040) (19,193,301)
----------- -----------
Total equity 29,755,818 35,870,672
---------- ----------
TOTAL LIABILITIES AND EQUITY $89,703,726 $90,635,950
=========== ===========
Yuma Energy, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2018 2017 2018 2017
---- ---- ---- ----
REVENUES:
Sales of natural gas and
crude oil $5,822,577 $6,554,704 $11,468,113 $13,699,128
---------- ---------- ----------- -----------
EXPENSES:
Lease operating and
production costs 2,795,825 3,059,124 5,421,593 5,720,388
General and administrative - stock-based
compensation
64,230 385,097 360,524 436,832
General and administrative -
other 1,587,628 1,906,629 3,336,866 4,082,631
Depreciation, depletion and
amortization 2,245,170 2,763,444 4,462,491 5,904,384
Asset retirement obligation
accretion expense 140,161 141,454 283,101 280,023
Impairment of long lived
assets 176,968 - 176,968 -
Bad debt expense 261,659 73,513 327,467 73,513
------- ------ ------- ------
Total expenses 7,271,641 8,329,261 14,369,010 16,497,771
--------- --------- ---------- ----------
LOSS FROM OPERATIONS (1,449,064) (1,774,557) (2,900,897) (2,798,643)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Net gains (losses) from
commodity derivatives (2,095,570) 2,138,080 (3,346,830) 5,694,863
Interest expense (567,635) (482,285) (1,033,927) (978,376)
Gain (loss) on other property
and equipment - (70,874) - 484,768
Other, net 81,884 5,659 78,348 42,067
------ ----- ------ ------
Total other income (expense) (2,581,321) 1,590,580 (4,302,409) 5,243,322
---------- --------- ---------- ---------
INCOME (LOSS) BEFORE INCOME
TAXES (4,030,385) (183,977) (7,203,306) 2,444,679
Income tax expense (benefit) - (20,581) - 5,950
--- ------- --- -----
NET INCOME (LOSS) (4,030,385) (163,396) (7,203,306) 2,438,729
PREFERRED STOCK:
Dividends paid in kind 374,416 349,300 738,433 688,910
------- ------- ------- -------
NET INCOME (LOSS)
ATTRIBUTABLE TO COMMON
STOCKHOLDERS $(4,404,801) $(512,696) $(7,941,739) $1,749,819
=========== ========= =========== ==========
INCOME (LOSS) PER COMMON SHARE:
Basic ($0.19) ($0.04) ($0.35) $0.14
Diluted ($0.19) ($0.04) ($0.35) $0.14
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic 23,082,334 12,235,286 22,948,475 12,223,337
Diluted 23,082,334 12,235,286 22,948,475 12,407,996
Yuma Energy, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
2018 2017
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Reconciliation of net income (loss) to net cash provided
by (used in) operating activities:
Net income (loss) $(7,203,306) $2,438,729
Depreciation, depletion
and amortization of
property and equipment 4,462,491 5,904,384
Impairment of long
lived assets 176,968 -
Amortization of debt
issuance costs 260,803 172,826
Deferred rent
liability, net 25,668 -
Stock-based
compensation expense 360,524 436,832
Settlement of asset
retirement obligations (575,817) (227,346)
Asset retirement
obligation accretion
expense 283,101 280,023
Bad debt expense 327,467 73,513
Net (gains) losses from
commodity derivatives 3,346,830 (5,694,863)
Gain on sales of fixed
assets - (556,141)
Loss on write-off of
abandoned facilities - 71,373
(Gain) loss on write-
off of liabilities net
of assets (103,045) (34,835)
Changes in assets and liabilities:
(Increase) decrease in
accounts receivable 1,339,227 426,945
Decrease in prepaids,
deposits and other
assets 297,321 521,167
(Decrease) increase in
accounts payable and
other current and non-
current liabilities 65,487 (923,200)
------ --------
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES 3,063,719 2,889,407
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
for oil and gas
properties (6,928,684) (4,526,587)
Proceeds from sale of
oil and gas properties 1,000,000 5,400,563
Proceeds from sale of
other fixed assets - 641,556
Derivative settlements (1,189,211) 550,675
---------- -------
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES (7,117,895) 2,066,207
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from
borrowings on senior
credit facility 14,300,000 -
Repayment of borrowings
on senior credit
facility (7,000,000) (7,500,000)
Repayments of
borrowings -insurance
financing (556,898) (512,783)
Debt issuance costs - (2,152)
Shelf registration
costs (64,050) -
Treasury stock
repurchases (413,612) (23,270)
-------- -------
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES 6,265,440 (8,038,205)
--------- ----------
CHANGE IN CASH AND CASH
EQUIVALENTS 2,211,264 (3,082,591)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD 137,363 3,625,686
------- ---------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD $2,348,627 $543,095
========== ========
Supplemental disclosure of cash flow information:
Interest payments (net
of interest
capitalized) $773,150 $811,042
Interest capitalized $133,772 $112,136
Supplemental disclosure of significant non-cash activity:
(Increase) decrease in
capital expenditures
financed by accounts
payable $3,252,112 $(386,337)
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SOURCE Yuma Energy, Inc.
