Yuma Energy, Inc. Retains Seaport Global Securities LLC, and Reports Third Quarter 2018 Financial Results
HOUSTON, Nov. 14, 2018 /PRNewswire/ -- Yuma Energy, Inc. (NYSE American: YUMA) (the "Company") today announced that it has retained Seaport Global Securities LLC, an investment banking firm, to advise the Company on its strategic and tactical alternatives, including possible mergers, acquisitions and divestitures. The Company also reported on its liquidity as well as its financial results for the quarter ended September 30, 2018.
Liquidity
As previously reported, the Company initiated several strategic alternatives to mitigate 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 of 2018, the Company agreed to sell its Kern County, California properties for $4.7 million in gross proceeds and the buyer's assumption of certain plugging and abandonment liabilities, and received a non-refundable deposit of $275,000. The sale did not close as scheduled, and the buyer forfeited the deposit. The Company currently anticipates that it will close the sale with the same buyer in the fourth quarter of 2018 on re-negotiated terms. Upon closing, the Company anticipates that the majority of the proceeds will be applied to the repayment of borrowings under the credit facility; however, there can be no assurance that the transaction will close.
On August 20, 2018, the Company sold its 3.1% leasehold interest consisting of 9.8 net acres in one section in Eddy County, New Mexico for $127,400. On October 23, 2018, the Company sold substantially all of its Bakken assets in North Dakota for approximately $1.16 million in gross proceeds and the buyer's assumption of certain plugging and abandonment liabilities. On October 24, 2018, the Company sold certain deep rights in undeveloped acreage located in Grady County, Oklahoma for approximately $120,000. Proceeds of $1.0 million from these non-core asset sales were applied to the repayment of borrowings under the credit facility in October 2018, bringing the current outstanding balance and borrowing base under the credit facility to $34.0 million, with the balance of the proceeds used for working capital purposes.
Additionally, the Company has reduced its personnel by nine employees since December 31, 2017, a 26% decrease. This brings the Company's headcount to 25 employees at September 30, 2018. Also, the Company has taken 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.
The Company plans to take further steps to mitigate its limited liquidity which may include, but are not limited to, further reducing or eliminating capital expenditures; selling additional assets; further reducing general and administrative expenses; 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 improve the Company's limited liquidity.
The Company has borrowings under its credit facility that require, among other things, compliance with certain financial ratios and covenants. Due to operating losses the Company sustained during recent quarters, at September 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. Due to this non-compliance, the Company classified its entire bank debt as a current liability in its financial statements as of September 30, 2018.
On October 9, 2018, the Company received a notice and reservation of rights from the administrative agent under its credit facility advising that an event of default has occurred and continues to exist by reason of the Company's noncompliance with the liquidity covenant requiring it to maintain cash and cash equivalents and borrowing base availability of at least $4.0 million. As a result of the default, the lenders may accelerate the outstanding balance under the credit facility, increase the applicable interest rate by 2.0% per annum or commence foreclosure on the collateral securing the loans. As of the date of this release, the lenders have not accelerated the outstanding amount due and payable on the loans, increased the applicable interest rate or commenced foreclosure proceedings, but they may exercise one or more of these remedies in the future. The Company intends to commence discussions with the lenders under the credit facility concerning a forbearance agreement or waiver of the event of default; however, there can be no assurance that the Company and the lenders will come to any agreement regarding a forbearance or waiver of the event of default.
As of September 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 $41.07 million (inclusive of the Company's outstanding debt under its credit facility) and a loss from operations of $6.89 million for the nine months ended September 30, 2018.
The factors 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.
Third 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 September 30, 2018 and 2017, and the average sales price per unit sold.
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Production
volumes:
Crude oil and
condensate
(Bbls) 42,642 57,134 137,121 199,774
Natural gas
(Mcf) 500,969 757,361 1,672,650 2,442,899
Natural gas
liquids (Bbls) 22,894 32,694 77,111 101,260
Total (Boe) (1) 149,031 216,055 493,007 708,184
Average prices
realized:
Crude oil and
condensate
(per Bbl) $72.48 $47.86 $68.26 $48.42
Natural gas
(per Mcf) $2.92 $3.04 $3.01 $3.05
Natural gas
liquids (per
Bbl) $38.12 $23.81 $32.47 $23.68
(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 September 30, 2018 and 2017.
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Sales of natural
gas and crude oil:
Crude oil and
condensate $3,090,585 $2,734,269 $9,360,102 $9,673,049
Natural gas 1,463,581 2,304,154 5,030,751 7,445,564
Natural gas liquids 872,689 778,460 2,504,115 2,397,398
Total revenues $5,426,855 $5,816,883 $16,894,968 $19,516,011
Expenses
The Company's lease operating expenses ("LOE") and LOE per Boe for the three and six months ended September 30, 2018 and 2017, are set forth below:
Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Lease operating
expenses $1,609,659 $1,506,747 $5,165,788 $5,049,551
Severance, ad
valorem taxes
and marketing 855,361 1,002,605 2,720,825 3,180,189
Total LOE $2,465,020 $2,509,352 $7,886,613 $8,229,740
LOE per Boe $16.54 $11.61 $16.00 $11.62
LOE per Boe
without
severance, ad
valorem taxes
and marketing $10.80 $6.97 $10.48 $7.13
Commodity Derivative Instruments
Commodity derivative instruments open as of September 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 438,434 1,660,297 1,095,430
Price $2.97 $2.75 $2.68
CRUDE OIL (Bbls):
Swaps
Volume 43,768 156,320
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. 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)
September 30,
December 31,
2018 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,545,644 $137,363
Accounts receivable, net of allowance for doubtful accounts:
Trade 2,795,115 4,496,316
Officer and employees 4,229 53,979
Other 487,678 1,004,479
Prepayments 373,884 976,462
Other deferred charges 307,686 347,490
Total current assets 6,514,236 7,016,089
OIL AND GAS PROPERTIES (full cost method):
Proved properties 504,594,550 494,216,531
Unproved properties - not subject to amortization - 6,794,372
---
504,594,550 501,010,903
Less: accumulated depreciation, depletion, amortization and impairment (431,069,270) (421,165,400)
Net oil and gas properties 73,525,280 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 (1,339,896) (1,409,535)
Net other property and equipment 2,762,744 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 $83,349,849 $90,635,950
===
Yuma Energy, Inc.
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Unaudited)
September 30,
December 31,
2018 2017
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of debt $35,000,000 $651,124
Accounts payable, principally
trade 7,582,015 11,931,218
Commodity derivative
instruments 3,001,449 903,003
Asset retirement obligations 325,805 277,355
Other accrued liabilities 1,678,112 2,295,438
Total current liabilities 47,587,381 16,058,138
LONG-TERM DEBT - 27,700,000
---
OTHER NONCURRENT LIABILITIES:
Asset retirement obligations 10,395,929 10,189,058
Commodity derivative
instruments 545,992 336,406
Deferred rent 261,698 290,566
Employee stock awards 115,616 191,110
Total other noncurrent
liabilities 11,319,235 11,007,140
COMMITMENTS AND CONTINGENCIES (Notes 2 and 15)
EQUITY
Series D convertible preferred
stock ($0.001 par value,
7,000,000 authorized,
2,005,849 issued and
outstanding as of September
30, 2018, and 1,904,391
issued and outstanding as of
December 31, 2017) 2,006 1,904
Common stock ($0.001 par
value, 100 million shares
authorized, 23,243,763
outstanding as of September
30, 2018 and 22,661,758
outstanding as of December
31, 2017) 23,244 22,662
Additional paid-in capital 57,873,967 55,064,685
Treasury stock at cost
(380,525 shares as of
September 30, 2018 and 13,343
shares as of December 31,
2017) (439,099) (25,278)
Accumulated earnings (deficit) (33,016,885) (19,193,301)
Total equity 24,443,233 35,870,672
TOTAL LIABILITIES AND EQUITY $83,349,849 $90,635,950
===
Yuma Energy, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
---
2018 2017 2018 2017
---
REVENUES:
Sales of natural gas and
crude oil $5,426,855 $5,816,883 $16,894,968 $19,516,011
EXPENSES:
Lease operating and
production costs 2,465,020 2,509,352 7,886,613 8,229,740
General and administrative -
stock-based compensation 143,214 414,660 503,738 851,492
General and administrative -
other 1,314,666 1,622,528 4,651,532 5,705,159
Deposit forfeiture (275,000) (275,000) -
Depreciation, depletion and
amortization 2,140,310 2,761,668 6,602,801 8,666,052
Asset retirement obligation
accretion expense 140,701 138,867 423,802 418,890
Impairment of oil and gas
properties 3,397,281 3,397,281 -
Impairment of long lived
assets 176,968 -
Bad debt expense (recovery) 85,928 (38,706) 413,395 34,807
---
Total expenses 9,412,120 7,408,369 23,781,130 23,906,140
---
LOSS FROM OPERATIONS (3,985,265) (1,591,486) (6,886,162) (4,390,129)
---
OTHER INCOME (EXPENSE):
Net gains (losses) from
commodity derivatives (873,723) (1,260,280) (4,220,553) 4,434,583
Interest expense (637,772) (429,313) (1,671,700) (1,407,689)
Gain (loss) on other property
and equipment 484,768
Other, net 43 14,043 78,390 56,110
---
Total other income (expense) (1,511,452) (1,675,550) (5,813,863) 3,567,772
---
INCOME (LOSS) BEFORE INCOME
TAXES (5,496,717) (3,267,036) (12,700,025) (822,357)
Income tax expense (benefit) 2,539 8,489
NET INCOME (LOSS) (5,496,717) (3,269,575) (12,700,025) (830,846)
PREFERRED STOCK:
Dividends paid in kind 385,125 359,311 1,123,559 1,048,221
---
NET INCOME (LOSS)
ATTRIBUTABLE TO COMMON
STOCKHOLDERS $(5,881,842) $(3,628,886) $(13,823,584) $(1,879,067)
===
INCOME (LOSS) PER COMMON SHARE:
Basic ($0.25) ($0.29) ($0.60) ($0.15)
Diluted ($0.25) ($0.29) ($0.60) ($0.15)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic 23,096,359 12,483,724 22,998,312 12,311,087
Diluted 23,096,359 12,483,724 22,998,312 12,311,087
Yuma Energy, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 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) $(12,700,025) $(830,846)
Depreciation, depletion
and amortization of
property and equipment 6,602,801 8,666,052
Impairment of oil and
gas properties 3,397,281
Impairment of long
lived assets 176,968
Amortization of debt
issuance costs 340,225 277,293
Deferred rent
liability, net 18,219 163,962
Stock-based
compensation expense 503,738 851,492
Settlement of asset
retirement obligations (590,709) (430,415)
Asset retirement
obligation accretion
expense 423,802 418,890
Bad debt expense 413,395 34,807
Net (gains) losses from
commodity derivatives 4,220,553 (4,434,583)
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 (103,044) (34,835)
Changes in assets and liabilities:
(Increase) decrease in
accounts receivable 1,864,956 736,959
Decrease in prepaids,
deposits and other
assets 546,280 715,603
(Decrease) increase in
accounts payable and
other current and non-
current liabilities (380,292) (1,177,583)
---
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES 4,734,148 4,472,028
---
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
for oil and gas
properties (7,711,751) (5,964,781)
Proceeds from sale of
oil and gas properties 1,127,400 5,400,563
Proceeds from sale of
other fixed assets 645,791
Derivative settlements (1,912,521) 1,103,525
---
NET CASH PROVIDED BY
(USED IN) INVESTING
ACTIVITIES (8,496,872) 1,185,098
---
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) (8,050,000)
Repayments of
borrowings -insurance
financing (651,124) (599,341)
Debt issuance costs (323,593)
Common stock
registration and
offering costs (64,050) (15,087)
Treasury stock
repurchases (413,821) (24,432)
---
NET CASH PROVIDED BY
(USED IN) FINANCING
ACTIVITIES 6,171,005 (9,012,453)
---
CHANGE IN CASH AND CASH
EQUIVALENTS 2,408,281 (3,355,327)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD 137,363 3,625,686
---
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD $2,545,644 $270,359
Supplemental disclosure of cash flow information:
Interest payments (net
of interest
capitalized) $1,324,950 $1,133,385
Interest capitalized $133,772 $208,310
Income tax refund
$ - $20,699
Supplemental disclosure of significant non-cash activity:
(Increase) decrease in
capital expenditures
financed by accounts
payable $3,922,933 $(3,291,386)
Common stock
subscription
receivable (net of
$909,600 offering
costs at closing)
$ - $8,690,400
Other accrued offering
expenses
$ - $271,227
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SOURCE Yuma Energy, Inc.
