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Bonanza Creek Energy Announces Third Quarter 2015 Financial and Operating Results; Enters Into an Agreement to Divest Its Rocky Mountain Infrastructure Subsidiary


  • Third quarter production volumes averaged 29.0 Mboe per day, compared to guidance of 28.6 Mboe per day
  • Cash operating costs of $14.01 per boe, a 16% sequential decrease from the second quarter of 2015
  • Adjusted EBITDAX(1) of $73.3 million; adjusted net loss(1) of $3.6 million, or $0.07 per diluted share
  • Third quarter CAPEX of $88.3 million, a 46% sequential decrease from the second quarter; Company reiterates annual CAPEX of $420 million at the midpoint
  • Entered into an agreement with a midstream partner to divest its Rocky Mountain Infrastructure subsidiary for total anticipated cash consideration of $255 million


(1) Non-GAAP measure, see attached Reconciliation Schedules.

DENVER, Nov. 05, 2015 (GLOBE NEWSWIRE) -- Bonanza Creek Energy, Inc. (NYSE:BCEI) today announces its third quarter 2015 financial and operating results, and also announces it has entered into an agreement to divest its Rocky Mountain Infrastructure subsidiary. The Company has posted a related investor presentation to its website at www.bonanzacrk.com and has scheduled a conference call to discuss these results on November 6, 2015 at 9:00 AM Mountain Time (11:00 AM Eastern Time). Dial-in information is included at the end of this release.

Richard Carty, President and Chief Executive Officer, commented, "The Company had an excellent quarter, with production volumes above our guidance, continuous improvement programs driving cash costs meaningfully lower, and improved production from redesigned well completions. Our operating teams have worked diligently throughout the year to target incremental productivity and efficiency gains, which are now being realized through lower field development costs and enhanced field-wide productivity. In addition, we announced today that we have entered into an agreement to sell our Rocky Mountain Infrastructure (“RMI”) asset that was established in the second quarter, to a strategic midstream partner for total anticipated cash proceeds of $255 million. This is a big accomplishment, as it validates our value creation strategy for stockholders and provides significant additional liquidity for a Company of our size. Our sustainability and resilience have been further buttressed as total pro forma liquidity as of September 30, 2015, increases to $594 million. In addition to an enhanced liquidity position, the sale will provide drilling incentives in 2016 and 2017, and will refocus the Company's talent and capital toward a very productive pure upstream business model. We look forward to a long-term relationship with our midstream partner, as we continue to develop the estimated 500 million barrels of equivalent resource on our contiguous 70,000 net acre position in the Wattenberg."

Third Quarter 2015 Results

For the third quarter of 2015, the Company reported average quarterly daily production of 29.0 Mboe per day, a 14% increase from the third quarter of 2014 (5% increase adjusted for estimated 3-stream volumes), and a 4% sequential increase from the second quarter of 2015. Product mix for the quarter was unchanged from the previous quarter at 59% oil, 17% NGLs, and 23% natural gas.

Net revenue for the third quarter of 2015 was $72.1 million, compared to $156.4 million for the third quarter of 2014. Crude oil and liquids accounted for approximately 90% of total revenue. Average realized prices for the third quarter of 2015 are presented below.

Average Realized Prices
For the Three Months Ended
September 30, 2015
Before
Derivatives
After
Derivatives
Oil (per Bbl)$38.87$62.75
Gas (per Mcf)$2.13$2.32
NGL (per Bbl)$7.91$7.91
BOE (Per BOE)$27.09$41.25

Cash operating costs for the quarter were $37.3 million, or $14.01 per boe, a 27% decrease from $19.27 per boe ($17.84 per boe adjusted for estimated three-stream volumes), in the third quarter of 2014, and a 16% sequential decrease from the second quarter of 2015. Cash operating costs for the quarter were lower as a result of reduced G&A and severance/ad valorem taxes.

During the third quarter, the Company underwent a workforce reorganization to better align its employee base and organization with tempered activity levels. The Company incurred a one-time charge of approximately $1.2 million related to severance and expects its general and administrative expense to be reduced by approximately $5.3 million annually as a result of this reorganization. Reported general and administrative expense for the quarter was $17.8 million, or $6.69, per boe, ($5.85 per boe adjusted for estimated 3-stream volumes), a 21% sequential decrease per barrel from the second quarter of 2015. Adjusting for the severance charge in the third quarter, total G&A expense was $6.24 per boe. Cash G&A expense for the quarter was $5.50 per boe or $5.05 per boe adjusted for the severance charge related to the reorganization, which was a 25% sequential reduction from the second quarter of 2015.

Severance and ad valorem taxes for the quarter were $2.4 million, which was a sequential decrease of approximately $2.0 million from the prior quarter due to a severance tax credit in the Company's Rocky Mountain region.

Depreciation, depletion and amortization for third quarter of 2015 was $58.6 million, or $22.01 per boe, an 18% decrease from $26.95 per boe ($24.97 per boe adjusted for estimated 3-stream volumes), in the third quarter 2014.

Total costs incurred for the third quarter of 2015 were $88.3 million, of which $10.5 million was related to RMI compared to total costs incurred of $164.0 million for the second quarter of 2015, of which $28.4 million was related to RMI.

Reported net loss for the third quarter of 2015 was $112.3 million, or $2.25 per diluted share, compared to net income of $48.8 million, or $1.18 per diluted share, for third quarter 2014. Adjusted net loss for third quarter 2015 was $3.6 million, or $0.07 per diluted share, compared to adjusted net income of $18.9 million, or $0.46 per diluted share for third quarter 2014.

Adjusted EBITDAX for third quarter 2015 was $73.3 million, a 33% decrease compared to $110.4 million for the third quarter 2014. The related decrease in realized price per BOE over the two periods was approximately 60%.

Adjusted net income and adjusted EBITDAX are non-GAAP financial measures. Please refer to the respective reconciliations in the schedules at the end of this release for additional information about these measures.

Operations Update

Rocky Mountain Region – Wattenberg Horizontal Development

During the quarter, the Company tied 24 gross (20 net) horizontal wells into sales, consisting of 14 net standard reach laterals (SRLs) and 6 net extended reach laterals (XRLs). All of the completed wells that were turned into sales during the quarter were operated by Bonanza Creek. For the full year 2015, the Company is on pace to complete and tie into sales approximately 89 gross (76 net) wells or approximately 94 net SRL equivalent wells in its Rocky Mountain region. For the third quarter, upstream capital costs incurred for the region were $65.4 million.

During the third quarter of 2015, production from the Rocky Mountain region averaged 23.7 Mboe/d, or 82% of total Company volumes. The production was comprised of 60% crude oil, 19% NGLs and 21% natural gas. On a 3-stream basis, sales volumes increased by 10% compared to the third quarter of 2014 and increased sequentially by 5% compared to the second quarter of 2015.

Rocky Mountain Region – Enhanced Capital Efficiency

The Company continues to drive efficiency gains in its operated program resulting in lower completed well costs. During the third quarter, the Company achieved well costs of $3.4 million for an SRL and $5.1 million for an XRL. After closing the RMI transaction, the Company expects to meet its goal of $3.0 million completed well costs for an SRL, an approximately 15%, or $500,000, reduction from well costs at the end of the second quarter of 2015. For XRL wells, the Company expects completed well costs of $4.5 million after the expected closing of the RMI transaction. During the quarter, the Company commissioned its centralized frac pond which allows water to be pumped to a completion job via flexible hose, eliminating the need for water to be trucked to completion locations. The remainder of well cost reductions come from the elimination of allocated midstream infrastructure costs which will no longer be incurred by Bonanza Creek upon the expected closing of its RMI transaction.

During the third quarter, Bonanza Creek released one of its two operated rigs due to reduced drilling times, which now average 5.9 days per SRL and 9.9 days for an XRL, an approximate 25% and 40% decrease in drill days from the beginning of 2015, respectively. Due to these drilling efficiencies, the Company expects to drill the same number of wells in 2015 as was originally contemplated with a lower average rig count.

The Company released results on a completion design test that increased sand loading by 50% to approximately 6 million pounds of sand for an SRL, or 1,500 pounds per lateral foot. The test wells were completed in the third quarter of 2014 on the eastern side of the legacy acreage position and have over 300 days of production data. After 300 days of production, the test wells performed approximately 20% better on a cumulative production basis and resulted in a 45% decrease in well payback period when compared to a similar well completed with 1,000 pounds of sand per lateral foot. The incremental cost of the additional sand is approximately $200,000. The Company plans to implement the increased sand completion design into the majority of its contemplated 2016 program.

During the third quarter, the Company continued to realize decreased downtime due to the completion of the Pronghorn gathering system and DCP Windmill pipeline. These two projects create flexibility and flow assurance, both on the Company's low pressure system as well as the DCP system. The subsequent lower, more consistent line pressures have resulted in a 50% decrease in measured production volatility on the Company's eastern acreage.

Differentials to WTI in the Wattenberg Field have decreased to an average of $9.11 per Bbl during the third quarter compared to $9.22 per Bbl during the second quarter of 2015.

Mid-Continent Region – Cotton Valley Development

During the third quarter of 2015, Bonanza Creek spud 8 gross (7 net) Cotton Valley wells, tied 7 gross (6 net) wells into sales and performed 14 gross (12 net) re-completions. For the third quarter, capital costs incurred for the region were $12.2 million.

The Mid-Continent region contributed 5.3 Mboe/d, or 18% of total Company net sales volumes for the third quarter of 2015, and was comprised of 52% crude oil, 16% NGLs and 32% natural gas. Sales volumes were down 11% compared to the third quarter of 2014 and unchanged from the second quarter of 2015.

Rocky Mountain Infrastructure Divestiture

Bonanza Creek has...


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