Earthstone Energy, Inc. (NYSE: ESTE) ('Earthstone', the 'Company', 'we', 'our' or 'us'), today announced financial and operating results for the three and six months ended June 30, 2023.
Second Quarter 2023 Highlights
Announced the Novo Acquisition for $1 billion on June 15, 2023, which is expected to close on August 15, 2023
Achieved record average daily production of 105,493 Boepd(1) (42% oil), which exceeded the mid-point of full-year 2023 production guidance by 5.5%
Net income(2) of $82.4 million, and Adjusted Net Income(3) of $75.6 million
Adjusted EBITDAX(3) of $238.8 million
Net cash provided by operating activities of $218.4 million
Free Cash Flow(3) of $41.9 million
Capital expenditures of $174.4 million, which comprised 23% of the mid-point of full-year 2023 capital expenditures guidance
Issued $500 million of senior unsecured notes due 2031
Year to Date 2023 Highlights
Average daily production of 104,974 Boepd(1) (43% oil), which exceeded the mid-point of full-year 2023 production guidance by 5.0%
Net income(2) of $168.7 million, and Adjusted Net Income(3) of $184.7 million
Adjusted EBITDAX(3) of $505.7 million
Net cash provided by operating activities of $476.8 million
Free Cash Flow(3) of $83.7 million
Capital expenditures of $376.7 million, which comprised 50% of the mid-point of full-year 2023 capital expenditures guidance
Represents reported sales volumes.
Net income (GAAP) represents the sum of Net Income attributable to Earthstone Energy, Inc., plus the Net income attributable to noncontrolling interest. The related consolidated weighted average shares outstanding of Class A Common Stock and Class B Common Stock were 141.6 million shares and 141.7 million shares, respectively, on an as-converted basis, for the three and six months ended June 30, 2023 ('Adjusted Diluted Shares', as reconciled in the 'Non-GAAP Financial Measures' section below). All shares of our Class B Common Stock issued and outstanding are held by the noncontrolling interest group.
Management Comments
Robert J. Anderson, President and Chief Executive Officer of Earthstone, stated, 'Earthstone's operational excellence continued during the second quarter, with production setting record levels and surpassing our internal forecast and the top end of our full-year guidance. We reported second-quarter production of 105,493 boepd, with the oil component over 44,000 barrels per day. Our low decline, stable production base, and strong new well results drove our production outperformance for the quarter. The execution of our disciplined operating plan and the strength of our operational performance translated directly into strong financial performance for the quarter. Company record daily production led to Adjusted EBITDAX of approximately $239 million and Free Cash Flow of approximately $42 million for the quarter. Year-to-date average daily production of approximately 105,000 Boepd exceeds the midpoint of our pre-Novo full-year guidance by 5,000 Boepd, showcasing the quality and productivity of our inventory and strong operational execution.'
Mr. Anderson continued, 'Also during the quarter, we continued to further our consolidation strategy with the announcement of the pending Novo acquisition, which will significantly increase the scale of our northern Delaware Basin footprint. The Novo acquisition, combined with last year's Chisholm and Titus acquisitions, will fundamentally transform Earthstone into a major operator in the northern Delaware Basin, with four of our five rigs expected to be drilling in this oil-rich and highly economic area. We look forward to closing the Novo transaction later this month and incorporating its high-quality inventory into our development plans. We expect Novo will increase our production base to more than 130,000 Boepd in the fourth quarter. We believe the Novo transaction will add significant Free Cash Flow as well as increased value for Earthstone shareholders.'
Operational Overview
We operated a five-rig drilling program during the second quarter of 2023 with three rigs in the Delaware Basin and two in the Midland Basin.
Delaware Basin Highlights
In the Delaware Basin, during the second quarter of 2023, we commenced drilling 12 gross (9.7 net) wells and brought 13 gross (9.5 net) wells online.
We completed the Lonesome Dove Com pad on acreage acquired in the Titus acquisition in the Stateline area in Lea County, New Mexico. The wells targeted the First and Second Bone Spring intervals. The four wells had an average peak IP-30 rate of 1,762 Boepd from laterals averaging approximately 7,700 feet with an average oil percentage of 72%. We hold a 90% working interest in the Lonesome Dove Com pad.
Also, in the Stateline area, we completed the Cattlemen Fed Com Pad, where we hold a 99% working interest. The 2-well pad had an average peak IP-30 of 1,934 Boepd and was approximately 67% oil. The average lateral length of the two wells was about 7,700 feet, and the wells targeted the First and Second Bone Spring. The Cattlemen Fed Com pad is located on acreage also acquired in the Titus acquisition.
Midland Basin Highlights
During the second quarter of 2023 in the Midland Basin, we began drilling nine gross (7.2 net) wells and brought four gross (3.0 net) wells online.
In Irion County, Texas, at the Barnhart pad, we put four wells online in July producing from the Wolfcamp Upper and Lower B zones. These wells were drilled with an average lateral length of approximately 13,340 feet. Although these wells have not been online for a full 30 days, their performance is in line with a prior pad completed by the Company in 2022 and they have average peak IP-20 over 1,030 Boepd with approximately 86% oil. We hold a 100% working interest in the Barnhart pad.
We recently put two wells online at the Mid-States East Unit 37-5 pad, and the wells are producing from the Wolfcamp D zone. This is our initial development of the Wolfcamp D interval in Midland County. The wells had an average lateral length of 9,950 feet with a 67% working interest. The wells are flowing naturally with no artificial lift and results are encouraging, with recent average daily production per well over 800 Boepd and 89% oil.
Conference Call Details
Earthstone is hosting a conference call on Thursday, August 3, 2023 at 2:00 p.m. Eastern (1:00 p.m. Central) to discuss the Company's financial results for the second quarter of 2023 and its outlook for the remainder of 2023. Prepared remarks by Robert J. Anderson, President and Chief Executive Officer, Mark Lumpkin, Jr., Executive Vice President and Chief Financial Officer, and Steven C. Collins, Executive Vice President and Chief Operating Officer, will be followed by a question and answer session.
Investors and analysts are invited to participate in the call by dialing 877-407-6184 for domestic calls or 201-389-0877 for international calls, in both cases asking for the Earthstone conference call. A webcast will also be available through the Company website (www.earthstoneenergy.com). Please select 'Events & Presentations' under the 'Investors' section of the Company's website and log on at least 10 minutes in advance to register.
A replay of the call and webcast will be available on the Company's website and by telephone until 2:00 p.m. Eastern (1:00 p.m. Central), Thursday, August 17, 2023. The number for the replay is 877-660-6853 for domestic calls or 201-612-7415 for international calls, using Replay ID: 13739946.
About Earthstone Energy, Inc.
Earthstone Energy, Inc. is a growth-oriented, independent energy company engaged in acquisitions and the development and operation of oil and natural gas properties. Its primary assets are located in the Permian Basin of New Mexico and west Texas. Earthstone's Class A Common Stock is listed on the New York Stock Exchange under the symbol 'ESTE.'
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,' 'guidance,' 'target,' '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 the expected benefits of the Novo Acquisition to Earthstone and its stockholders, the anticipated completion of the Novo Acquisition or the timing thereof, the expected future reserves, production, financial position, business strategy, revenues, earnings, free cash flow, costs, capital expenditures and debt levels of the Company, and plans and objectives of management for future operations. Forward-looking statements are based on current expectations and assumptions and analyses made by Earthstone and its management in light of their 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 to expectations is subject to a number of material risks and uncertainties, including but not limited to: the ability to complete the Novo Acquisition on anticipated terms and timetable; Earthstone's ability to integrate its combined operations successfully after the Novo Acquisition and achieve anticipated benefits from it; the possibility that various closing conditions for the Novo Acquisition may not be satisfied or waived and risks relating to any unforeseen liabilities of Earthstone or Novo. For further discussions of risks and uncertainties, please refer to those set forth in Earthstone's annual report on Form 10-K for the year ended December 31, 2022, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K, and other Securities and Exchange Commission filings. Earthstone undertakes no obligation to revise or update publicly any forward-looking statements except as required by law.
Contact:
Clay Jeansonne
Tel: 713-379-3080
Email: cjeansonne@earthstoneenergy.com
EARTHSTONE ENERGY, INC. 