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Lilis Energy Reports First Quarter 2019 Operating and Financial Results and Provides Second Quarter Guidance

Management to Review Financial Results and Provide an Update on Corporate Developments on Conference Call Webcast at 11:00 a.m. EDT on Friday, May 10, 2019

HOUSTON, May 09, 2019 (GLOBE NEWSWIRE) -- Lilis Energy, Inc. (NYSE American: LLEX), an exploration and development company operating in the Permian Basin of West Texas and southeastern New Mexico, today reported financial and operating results for the first quarter of 2019.

First Quarter 2019 Highlights

  • Increased net sales production volumes by 75% to 6,058 BOE/d, including a 52% increase in crude oil production to 3,530 BOE/d, for the quarter ended March 31, 2019, as compared to the same period in 2018
  • Sales volumes were 72% Liquids, including 58% crude oil
  • Significant technical advancements in the third Bone Spring formation and choke management protocol, resulting in improved production rates on previous and recent wells
  • Reduced crude transportation costs from approximately $5.15 per Bbl as of December 31, 2018, to approximately $0.75 per Bbl in March 2019, through continued focus on improvements in infrastructure and sales agreements
  • Realized pricing for March was 93% of WTI, with an approximate $16.50 per barrel increase in realized oil price, as compared to January
  • Realized pricing for the full quarter was 84% of WTI, with projected realized pricing between 90% - 95% in the second quarter
  • Reduced salt-water disposal costs from $4.43 per BOE, for the three months ended March 31, 2018, to $2.98 per BOE as of March 2019, through continued improvements in infrastructure and sales agreements
  • Increased proved reserves by 298% to approximately 44 MMBOE, 68% of which are Liquids (51% oil and 17% NGLs), as of March 31, 2019, as compared to March 31, 2018
  • Recapitalization completed in the first quarter improved leverage ratios and resulted in a 16% increase in borrowing base from $108 million to $125 million
  • Accelerated capital expenditures to bring new wells to sales in the second and third quarter, with the expectation of realizing the benefits of increased realized pricing, the Company reaffirms cash flow neutrality expected in the second half of 2019

First Quarter 2019 Summary

Production for first quarter 2019 was 545,217 barrels of oil equivalent (Boe), or an average of 6,058 Boe per day (Boep/d), an increase of 75% from first quarter 2018. Average daily oil production for first quarter 2019 totaled 3,530 barrels per day (MBop/d), an increase of 52% from first quarter 2018. Natural gas liquids (NGL) and natural gas production for first quarter 2019 totaled 74,446 barrels (Bbls) and 918 million cubic feet (MMcf), representing respective 116% and 122% increases from first quarter 2018.

Lilis’ average realized price for oil, NGLs, and natural gas for first quarter 2019, excluding the effect of commodity derivatives, was $46.28 per Bbl, $19.75 per Bbl, and $1.66 per Mcf, respectively, compared to $60.40 per Bbl, $26.60 per Bbl, and $2.15 per Mcf, respectively, for first quarter 2018.

Net loss attributable to common stockholders was $27.5 million, or $0.35 per basic and diluted share, for the three months ended March 31, 2019, compared to a net gain of $10.6 million, or $0.14 per basic and $0.17 per diluted share, for the three months ended March 31, 2018. Total revenue was $17.7 million for the three months ended March 31, 2019, an increase of 23% over the comparable quarter in 2018. The Company generated an adjusted EBITDAX (non-GAAP) of $6.5 million for the quarter, a 45% increase, compared to $4.5 million in the first quarter of 2018.

Capital Expenditure Overview

The Company continues the strategy of delineating and de-risking its acreage position, further validating the strength of its Delaware Basin position. As a result of the decline in commodity prices in late 2018, the Company reduced drilling and completion activity resulting in a backlog of six drilled but uncompleted (DUC) wells. 

As a result, the Company decided to front-load a portion of its 2019 capital expenditure budget in the first and second quarter to accelerate the completion of 2018 DUCs, in addition to the 2019 drilling program. In doing so, the Company believes it will maximize production revenues associated with existing DUC wells in the second and third quarters of 2019. 

The Company believes these completions will coincide with significant uplifts in realized pricing and margin enhancements that will also be recognized during the second and third quarters.

During the three months ended March 31, 2019, total capital expenditure cost incurred was $33 million, including $24.5 million related to drilling and completions. Total capital expenditure is comprised of the following:

  • approximately $19 million related to six 2018 DUCs
  • approximately $5.5 million related to the 2019 drilling program
  • approximately $8.9 million related to non-recurring additional capital expenses

Non-recurring expenses are expected to provide significant future benefits to the Company, and include notably the Panther pilot well in the eastern acreage, fresh water wells, and new and upgraded facilities with advanced supervisory control and data acquisition (SCADA) systems’ production monitoring.

While production and revenue are expected to improve as DUCs are turned to sales, management continues to evaluate and closely monitor the 2019 capital program with the goal of continuing to improve capital expenditure returns. Several wells that accounted for significant capital spending during the first quarter have begun flowing to production. Capital spending in the second quarter will focus on completing the remaining DUCs, including the two Kudu wells, which are currently being drilled and completed. The Company remains on track towards cash flow neutrality in the second half of 2019 with its one rig program. However, we are evaluating adding a second rig in the back half of the year as our fundamentals and technology continue to improve.

Current Operational Overview

Four of the remaining five DUC wells, the Haley 1H, Haley 2H, NW Axis 1H and NE Axis 2H, will be converted to production during the second quarter of 2019. The Haley 1H and Haley 2H began flowing to sales in April 2019, and the NE Axis 2H has finished completion with expected sales in June. Additionally, the two Kudu wells are currently drilling and completing and are expected to be flowing to sales in June.

A detailed overview of Lilis’ current drilling operations and recent well activity can be found in the earnings presentation posted on the Company website.

Recent Well Results:

  • Haley #1H – Wolfcamp A (1 mile lateral): 
    ○ IP24-hour rate of 1,422 Boepd, 1,124 Bopd (90% liquids, 79% oil), or 317 Boepd per 1,000 lateral ft.
  • Haley #2H – Wolfcamp A (1 mile lateral):
    ○ IP24-hour rate of 1,048 Boepd, 639 Bopd (81% liquids, 61% oil), or 234 Boepd per 1,000 lateral ft.
  • Oso #1H – Upper Wolfcamp A (1 ½ mile lateral):
    ○ The well remains in the clean-up phase and has not reached its peak rate
    ○ Current 24-hour rate of 910 Boepd, 500 Bopd (65% liquids, 55% oil), with peak rate expected in June

Second Quarter 2019 Guidance

The strategic decision to front-load a portion of the Company’s 2019 capital expenditure budget in the first quarter was made to maximize production revenues, by coinciding the completion of 2018 DUCS and the 2019 new drills with anticipated significant uplifts in realized pricing and margin enhancements. As a result, the Company is increasing its full-year CAPEX guidance to $60 - $70 million. In addition to providing second quarter guidance, the Company is reaffirming full-year guidance metrics and increasing the top end oil production from 4.6 MBbls/d to 4.8 MBbls/d.

 
Second Quarter and Year-end 2019 Guidance
 
  1Q'19A 2Q'19E 2019E
Oil Production (MBbls/d) 3.5 3.6 - 3.8 4.2 ─ 4.8
NGL Production (MBbls/d) 0.8 0.8 ─ 1.0 1.0 ─ 1.2
Liquids Production (MBbls/d) 4.3 4.4 ─ 4.8 5.2 ─ 5.8
       
Total Capital Expenditure ($MM) (1) $33 $15 ─ $20 $60 ─ $70
 
(1) Includes non-recurring expenditures of $8.9 million
 

Conference Call

Management will host a conference call on Friday, May 10, 2019 at 11:00 a.m. EDT to review financial results and provide an update on corporate developments. Following management’s formal remarks, there will be a question and answer session.

Participants are asked to preregister for the call through the following link: http://dpregister.com/10131051. Please note that registered participants will receive their dial in number upon registration and will dial directly into the call without delay. Those without internet access or who are unable to pre-register may dial in by calling: 1-844-695-5520 (domestic), 1-412-902-6761 (international). All callers should dial in approximately 10 minutes prior to the scheduled start time and ask to be joined into the Lilis Energy Inc. call. The conference call will also be available through a live webcast, which can be accessed via the following link: https://services.choruscall.com/links/llex190510.html, which is also available through the Company’s website at: http://investors.lilisenergy.com/events-presentations. A webcast replay of the call will be available approximately one hour after the end of the call through August 10, 2019. The replay can be accessed through the above links.

About Lilis Energy, Inc.

Lilis Energy, Inc. is a Houston-based independent oil and gas exploration and production company that operates in the Permian’s Delaware Basin, considered among the leading resource plays in North America. Lilis’ current total net acreage in the Permian Basin is over 20,000 acres. Lilis Energy's near-term E&P focus is to grow current reserves and production and pursue strategic acquisitions in its core areas. For more information, please visit www.lilisenergy.com.

Forward-Looking Statements:

This press release contains forward-looking statements within the meaning of the federal securities laws. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These risks include, but are not limited to, our ability to replicate the results described in this release for future wells; the ability to finance our continued exploration, drilling operations and working capital needs; all the other uncertainties, costs and risks involved in exploration and development activities; and the other risks identified in the Company’s Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this press release are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.

Forward-looking statements regarding expected production levels are based upon our estimates of the successful completion of drilled wells on schedule. Actual sales production rates from our wells can vary considerably from tested initial production (IP) rates and are subject to natural decline rates over the life of the well.

Contact:

Wobbe Ploegsma
V.P. Capital Markets & Investor Relations
210-999-5400, ext. 31

 
Condensed Consolidated Statement of Operations Information:
 
    For Three Months Ended
March 31,
    2019   2018
($ in thousands, except share and per share data)                
Oil and gas revenue   $ 17,697     $ 14,395  
Operating expenses:        
Production costs   4,764     3,263  
Gathering, processing and transportation   1,178     462  
Production taxes   906     850  
General and administrative   9,679     10,464  
Depreciation, depletion, amortization and accretion   8,153     4,641  
Total operating expenses   24,680     19,680  
Operating income (loss)   (6,983 )   (5,285 )
Other income (expense):        
Other income (expense)   31     1  
Loss from commodity derivative   (10,577 )   (1,769 )
Fair value change in derivative instruments   (335 )   28,388  
Interest expense   (4,828 )   (9,089 )
Total other income (expense)   (15,709 )   17,531  
Net loss before income tax   (22,692 )   12,246  
Paid-in-kind dividends on preferred stock   (4,825 )   (1,652 )
Net income (loss)   $ (27,517 )   $ 10,594  
         
Net loss per common share:        
Basic   $ (0.35 )   $ 0.14  
Diluted   $ (0.35 )   $ (0.17 )
             
Weighted average common shares outstanding:        
Basic   77,916,448     54,702,617  
Diluted   77,916,448     78,502,197  

/EIN News/ --

Condensed Consolidated Balance Sheet Information:
                 
         
    March 31, 2019   December 31, 2018
         
    ($ in thousands, except share and per share data)
Cash and cash equivalents   $ 11,228     $ 21,137  
Accounts receivables, net of allowance of $25 and $39, respectively     19,288       20,546  
Derivative instruments           2,551  
Prepaid expenses and other current assets     2,419       1,851  
Total current assets     32,935       46,085  
Total oil and natural gas properties, net     445,119       430,903  
Total assets   $ 485,666     $ 480,773  
Total current liabilities   $ 78,461     $ 76,967  
Total long-term liabilities     153,040       217,449  
Total liabilities     231,501       294,416  
Series C-1 Participating Preferred stock10,000,000 shares authorized, 100,000
     shares issued and outstanding with a stated value of $1,007, per share, as
     of March 31, 2019.
    72,021       106,774  
Series C-2 Participating Preferred stock10,000,000 shares authorized, 25,000
     shares issued and outstanding with a stated value of $1,007, per share, as
     of March 31, 2019.
    16,894       25,522  
Series D Participating Preferred stock10,000,000 shares authorized, 39,254
     issued and outstanding with a stated value of $1,006, per share, as of
     March 31, 2019.
    26,503       40,729  
Series E Convertible Preferred stock 10,000,000 shares authorized, 60,000
     issued and outstanding with a stated value of $1,006, per share, as of
     March 31, 2019
    62,486        
Series F Participating Preferred stock 10,000,000 shares authorized, 55,000
     issued and outstanding with a stated value of $1,007, per share, as of
     March 31, 2019
    47,053        
Total stockholders’ equity (91,037,902 and 71,182,016 shares issued and
     outstanding as of March 31, 2019 and December 31, 2018, respectively)
    29,208       13,332  
Total liabilities and stockholders’ equity   $ 485,666     $ 480,773  


Condensed Consolidated Statement of Cash Flows Information:
 
    Three Months Ended March 31,
         
    2019
  2018
         
    ($ in thousands)
Net cash provided by (used in):          
Operating activities   $ (10,498 )   $ (4,058 )
Investing activities   (28,709 )   (90,289 )
Financing activities   29,298     112,519  


Non-GAAP Adjusted EBITDAX
 
    For the Three Months Ended
    March 31,
         
    2019
  2018
         
Reconciliation of Adjusted EBITDAX:    
Net income (loss)   $ (22,692 )   $ 12,246  
Non-cash equity-based compensation   3,645     3,031  
Interest expense, net   4,828     9,089  
Depreciation, depletion, amortization and accretion   8,153     4,641  
Loss (gain) from fair value changes of debt conversion and warrant derivatives   335     (28,388 )
Unrealized loss from commodity derivatives, net   8,976     1,131  
Other expense (income), net   (31 )   (1 )
Non-recurring expenses   3,251     2,721  
Adjusted EBITDAX   $ 6,466     $ 4,470  
 

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