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Lonestar Announces Second Quarter 2018 Financial Results And Provides Operational Update


FORT WORTH, Texas, Aug. 5, 2018 PRNewswire -- Lonestar Resources US Inc. (NASDAQ: LONE) (including its subsidiaries, "Lonestar," "we," "us," "our" or the "Company") today reported financial and operating results for the three months ended June 30, 2018.

HIGHLIGHTS

  • Lonestar reported a record production result with a 98% increase in net oil and gas production to 11,140 Boe/d during the three months ended June 30, 2018 ("2Q18"), compared to 5,635 Boe/d for the three months ended June 30, 2017 ("2Q17"). Production volumes exceeded the high end of the Company's guidance of 10,000 - 10,500 Boe/d, and were 79% crude oil and NGL's on an equivalent basis. The increase in production was attributable to continued excellence in our drilling and completion program that has seen greater-than-expected well productivity at our Hawkeye, Horned Frog and Karnes properties in the Eagle Ford Shale.
  • Benefitting from continued outperformance in production results and good visibility on new well startups, Lonestar issued production guidance of 11,750-12,200 Boe/d for the third quarter of 2018 ("3Q18"). The midpoint of this guidance represents an 8% sequential increase over 2Q18 results and is 57% higher than production reported for the three months ended September 30, 2017("3Q17"). It is also important to note that the forecasted oil mix increases from 57% in 2Q18 to 61% in 3Q18 as Lonestar begins to bring on the oiliest part of its 2018 drilling program. Lonestar also issued guidance for 3Q18 Adjusted EBITDAX of $32 to $34 million, which represents a 13% sequential improvement at its midpoint, and a 63% increase over 3Q17 results.
  • Based on continued outperformance in well results across its portfolio and that fact that we have outperformed our targeted improvement in debt metrics, Lonestar has elected to increase its 2018 capital program to bring 21 gross wells onstream, versus 19 gross wells previously. Consequently, Lonestar has increased its drilling and completion budget from a range of $110 - $115 millionto a range of $120 - $130 million. To account for continued outperformance of its 2018 program and the addition of 2 wells which will contribute for a portion of the fourth quarter of 2018, Lonestar is again increasing its full-year 2018 production guidance from 10,300-11,000 Boe/d to a range of 10,600-11,200 Boe/d, which equates to a 68% increase over 2017 results. Commensurately, Lonestar has also increased its 2018 EBITDAX guidance from a range of $110-$125 million to a range of $115-$130 million, based on a $60 average WTI oil price for the remainder of 2018.
  • Lonestar reported a net loss attributable to its common stockholders of $20.7 million, or ($0.84) per weighted average share, during 2Q18 compared to a net loss of $23.5 million, or ($1.07) per weighted average share during the 2Q17. Excluding, on a tax-adjusted basis, certain items that the Company does not view as either recurring or indicative of its ongoing financial performance, Lonestar's adjusted net loss for 2Q18 was $3.5 million, or ($0.14) per common share. Most notable among these items include: unrealized hedging losses on financial derivatives, stock-based compensation and non-recurring legal expenses. Please see Non-GAAP Financial Measures for additional information.
  • Lonestar reported a 131% increase in Adjusted EBITDAX for the three months ended June 30, 2018 of $29.2 million compared to $12.7 million for 2Q17, which exceeded our guidance of $27.0 - $29.0 million and is a Company record. This improvement was driven by a 98% increase in production and a 5% increase in the Company's oil-equivalent price realization after the effect of hedging. Please see Non-GAAP Financial Measures at the end of this release for the definition of Adjusted EBITDAX, a reconciliation of net loss to Adjusted EBITDAX, and the reasons for its use.
  • The visibility provided by a continuous drilling and completion program provides the Company with the confidence to issue a preliminary 2019 Outlook. Based on a drilling and completion budget of $120-$130 million, Lonestar sees daily production increasing to a range of 13,000 -14,000 Boe/d in 2019 and Adjusted EBITDAX increasing to a range of $140-$160 million. Importantly, this 2019 program can be executed with a single rig and can be essentially funded by internally generated cash flow.

Lonestar's Chief Executive Officer, Frank D. Bracken, III, stated, "In the second quarter, we achieved a production increase of 98% and a 131% increase in Adjusted EBITDAX.  Our record-setting second quarter results also represent sharp sequential improvements of 43% for production and 25% for Adjusted EBITDAX.  Our second quarter results begin to more fully reflect the outstanding drilling results we have generated thus far in 2018 and have generated operating metrics which continue to exceed guidance.  Equally important to Lonestar's improved outlook is the considerable progress we have made in improving our debt metrics and liquidity.  Since 2Q17, we have reduced Debt / EBITDAX (Last Quarter Annualized) from 5.4x to 2.8x in 2Q18"

Bracken further remarked, "Our momentum in the Eagle Ford Shale continues to build, and our technical, operational and financial achievements are delivering high price realizations, high margins and outstanding returns to our shareholders, giving us the confidence to augment our 2018 drilling and completion program.  Not only can the expanded 2018 program be executed with drilling, completion and fracture stimulation equipment currently under contract, but extending that program deeper into 2018 provides seamless transition into our 2019 program.  The visibility provided by a continuous drilling and completion program gives us the confidence to issue a preliminary 2019 Outlook, which sees production increasing by 24% over 2018 levels and Adjusted EBITDAX increasing by a similar amount.  Importantly, this 2019 program can be executed with a single rig and can be essentially funded by internally generated cash flow."

OPERATIONAL UPDATE

  • Lonestar reported net oil and gas production of 11,140 Boe/d during the three months ended June 30, 2018, an increase of 98% compared to 5,635 Boe/d during the three months ended June 30, 2017. 2Q18 production volumes consisted of 6,378 barrels of oil per day (57%), 2,438 barrels of NGLs per day (22%), and 13,943 Mcf of natural gas per day (21%). The Company's production mix for the three months ended June 30, 2018 was 79% liquid hydrocarbons.
  • Lonestar's Eagle Ford Shale assets delivered excellent wellhead realizations in 2Q18. Lonestar's realized wellhead crude oil price was $68.41 per barrel, which reflects a positive differential of $0.47/bbl vs. West Texas Intermediate. Lonestar's realized NGL price was $19.88 per barrel in the second quarter of 2018. Lonestar's natural realized wellhead natural gas price was $2.94 per Mcf, which reflects a positive differential of $0.11 to the Henry Hub.
  • Lonestar has delivered a significant reduction in cash operating costs in 2Q18. Total Cash Operating Expenses for the three months ended June 30, 2018 were $20.3 million, which was 48% higher than cash operating expenses of $13.7 million in the three months ended June 30, 2017. On a unit-of-production basis, cash operating expenses decreased 25% from $26.72 per Boe in the three months ended June 30, 2017 to $20.01 per Boe in the three months ended June 30, 2018 
    • Lease Operating Expenses ("LOE") for the three months ended June 30, 2018 were $5.7 million, which was 77% higher than Lease Operating Expenses of $3.2 million in the three months ended June 30, 2017, but was outpaced by a 98% increase in production. On a unit-of-production basis, lease operating expenses decreased 18% to $5.62 per Boe for the three months ended June 30, 2018. On a sequential basis, Lonestar reduced lease operating expenses per Boe by 5% to $5.62. For 2018, the Company expects LOE to be between $5.60 and $6.50 per Boe, as relatively fixed costs are spread over substantially larger production volumes.
    • Gathering, Processing & Transportation Expenses ("G,P&T") for the three months ended June 30, 2018 were $0.8 million, which was 157% higher than the G,P&T of $0.3 million in the three months ended June 30, 2017, but commensurate with a 183% increase in gas production. On a unit-of-production basis, G,P&T increased 30% to $0.79 per Boe for the three months ended June 30, 2018. For 2018, the Company expects G,P&T expense to average between $0.75 and $0.85 per Boe.
    • Production Taxes for the three months ended June 30, 2018 were $2.8 million, which was 156% higher than production taxes of $1.1 million in the three months ended June 30, 2017, driven largely by a 164% increase in wellhead oil and gas revenues. On a unit-of-production basis, production taxes increased 30% to $2.72 per Boe for the three months ended June 30, 2018.
    • General & Administrative Expenses, excluding stock-based compensation of $0.5 million in the three months ended June 30, 2017 and $2.3 million in the three months ended June 30, 2018 ("G&A"), decreased from $3.1 million to $3.0 million, respectively. On a unit-of-production basis, G&A per Boe was reduced 51% year over year, from $6.12 per Boe in 2017 to $2.98 per Boe in 2018. For 2018, the Company expects G&A to average between $2.80 and $3.00 per Boe.
    • Interest Expense excluding amortization of debt issuance cost, premiums, and discounts increased year over year from $6.0 million in the three months ended June 30, 2017 to $8.3 million in 2018. This was primarily due to a combination of higher stated interest rates and principal on the new 11.25% Senior Notes versus the 8.75% Senior Notes that were retired in January 2018. On a unit-of-production basis, interest per Boe decreased 30% year over year from $11.64 per Boe in 2017 to $8.15 per Boe in 2018. For 2018, the Company expects interest expense to average between $8.15 and $8.75 per Boe.
  • In the second quarter of 2018, Lonestar expanded its Eagle Ford operations, placing 5.0 gross / 4.4 net wells online, which included its first wells at Georg in Karnes County (3.0 gross / 2.4 net) and first wells at its Horned Frog NW property in La Salle County (2.0 gross / 2.0 net). Results at these locations have exceeded third party estimates, with initial production rates ("IP's") on the Georg wells coming in at greater than 1,200 Boepd and Horned Frog NW greater than 1,100 Boepd. In the third quarter, Lonestar plans to increase completion activity, placing 8.0 gross / 6.8 net wells online. This includes 2.0 gross / 2.0 net wells at Cyclone placed into flowback in July, 3.0 gross / 2.4 net wells at Georg during the month of August and 3.0 gross / 2.4 net wells at Culpepper during the month of September.

EAGLE FORD SHALE TREND- WESTERN REGION

Asherton - In July 2018, Lonestar commenced drilling the Asherton #1H and Asherton #3H with planned total measured depths of approximately 17,680 feet.  We project that these wells will have perforated intervals of approximately 10,800 feet.  Drilling operations are underway and fracture stimulation operations are scheduled for October 2018.  Lonestar owns a 99% working interest ("WI") and 75% Net Revenue Interest ("NRI") in these two wells.

Beall Ranch - In Dimmit County, no new wells were completed during the three months ended June 30, 2018.  The Beall Ranch leasehold is held by production, and Lonestar does not currently plan any drilling activity here in 2018. 

Burns Ranch Area - At the Burns Ranch leasehold in La Salle County, no new wells were completed during the three months ended June 30, 2018.  The Burns Ranch leasehold is held by production, and Lonestar does not currently plan any drilling activity here as part of its 2018 drilling and completion budget.

Horned Frog - In La Salle County, the Company further expanded its Eagle Ford Shale footprint by completing its first two locations at Horned Frog North West.  The Horned Frog North West #2H and #3H commenced flowback operations in June, 2018.  Results of these wells have been encouraging and have a substantially higher oil mix (+125% per foot) than the legacy Horned Frog acreage located to the South. The #2H and #3H wells were drilled to measured depths of 17,560 feet and 17,440 feet, respectively and were fracture-stimulated in engineered completions with an average proppant concentration of 2,030 pounds per foot across an average of 25 stages per well utilizing diverters.  The Horned Frog NW #2H, which has a perforated interval of 7,489 feet, continues to be choke-managed, and produced at a Max 30-day production rate of 1,110 Boe/d, consisting of 573 barrels of oil per day, 185 barrels of natural gas liquids per day, and 2,113 Mcf/d of natural gas on a 22/64" choke.   The Horned Frog NW #3H, which has a perforated interval of 7,331 feet, continues to be choke-managed, and produced at a Max 30-day production rate of 1,050 Boe/d, consisting of 551 barrels of oil per day, 172 barrels of natural gas liquids per day, and 1,964 Mcf/d of natural gas. Both of these wells are outperforming internal projections, particularly with respect to higher-than-expected oil rates.  Lonestar holds a 100% WI and 75% NRI in these wells and has an additional 5 drilling locations offsetting these wells.

Lonestar owns a 100% WI in the Horned Frog G #1H and Horned Frog H #1H, which were placed onstream in March 2018.   These wells have now been producing for in excess of four months and the results continue to outperform projections.   After registering Max-30 IP's averaging 2,155 Boe/d, these wells continue to exhibit robust deliverability on a constant choke.  During the first 120 days of production, the Horned Frog G #1H has produced cumulative production of 47,820 barrels of oil and 818,390 Mcf of natural gas, or 240,975 barrels of oil equivalent on a three-stream basis, an average of 2,008 Boe/d over its first 120 days of production.  Over the same period, the Horned Frog H #1H has produced cumulative production of 44,235 barrels of oil and 753,898 Mcf of natural gas, or 222,171 barrels of oil equivalent on a three-stream basis, an average of 1,865 Boe/d over its first 120 days of production.  To date, these are the two highest producing wells through the first 120 days of production in the Company's history and have outperformed third-party projections by 15%.

EAGLE FORD SHALE TREND- CENTRAL REGION

Cyclone - In July 2018, the Company completed drilling operations on the Cyclone DM #13H and Cyclone DM #14H to total measured depths of 20,205 feet and 19,685 feet, respectively. The Cyclone DM #13H and #14H wells were fracture-stimulated in engineered completions with an average proppant concentration of 1,590 pounds per foot over 35 stages and 34 stages, respectively.  The Cyclone DM #13H was completed with a perforated interval of 10,056 feet and tested 577 Bbls/d of oil and 329 Mcf/d of natural gas, or 652 Boe/d (three-stream) on a 28/64'' choke.  The Cyclone DM #14H was completed with a perforated interval of 9,600 feet and tested 635 Bbls/d of oil and 362 Mcf/d of natural gas, or 718 Boe/d (three-stream) on a 28/64'' choke.  Lonestar owns a 100% WI and 78.5% NRI in these wells.

Hawkeye - Lonestar owns an 87.5% WI in the Hawkeye #1H and Hawkeye #2H, which were placed onstream in January 2018.  In May, these wells were put on artificial lift which actually increased production by an average of 17% vs. the prior 30 day period.  The Hawkeye wells have continued to break away from forecast, outperforming third-party projections by 23%.  Now online for 180 days, the Hawkeye #1H has produced a cumulative 115,800 barrels of oil and 63,517 Mcf of natural gas, or 130,356 barrels of oil equivalent on a three-stream basis, or an average of 727 Boe/d over its first 180 days of production.  Over the same period, the Hawkeye #2H has produced a cumulative 99,335 barrels of oil and 53,615 Mcf of natural gas, or 111,620 barrels of oil equivalent on a three-stream basis, or an average of 617 Boe/d.  The Company continues to grow its leasehold position in the Hawkeye area, having recently acquired approximately 976 gross / 976 net acres which is contiguous to our existing leasehold, which can accommodate 7 additional locations.  Lonestar plans to drill two laterals on this newly acquired leasehold which are projected to average approximately 8,700' of perforated interval. We expect to place these wells onstream in November, 2018.

Karnes County- In May 2018, Lonestar completed the Georg EF #18H, Georg EF #19H, and Georg EF #20H to an average total measured depth of 15,450 feet. The Georg EF #18H, which has a perforated interval of 5,896 feet, produced at a Max 30-day production rate of 895 Boe/d, consisting of 775 barrels of oil per day, 64 barrels of natural gas liquids per day, and 336 Mcf per day of natural gas. The Georg EF #19H, which has a perforated interval of 6,116 feet, produced at a Max 30-day production rate of 898 Boe/d, consisting of 781 barrels of oil per day, 62 barrels of natural gas liquids per day, and 327 Mcf per day of natural gas.  The Georg EF #20H, which has a perforated interval of 5,979 feet, produced at a Max 30-day production rate of 1,052 Boe/d, consisting of 925 barrels of oil per day, 68 barrels of natural gas liquids per day, and 356 Mcf per day of natural gas.  Lonestar owns an 80% WI and 61% NRI in these wells.  To date, these wells have outperformed the projections of our independent petroleum engineer.

Pirate - In Wilson County, no new wells were completed during the three months ended June 30, 2018.  The Pirate leasehold is held by production, and Lonestar does not currently plan any drilling activity here in 2018.  

Current Operations- Lonestar plans to bring six more wells in the Central Region onstream during the third quarter of 2018.  In Karnes County, the Georg #24H, Georg #25H, and Georg #26H have total measured depths of 15,450 feet, 15,500 feet and 15,495 feet, respectively. Fracture stimulation operations have been completed and these wells are expected to begin flowback operations in mid-August.  Lonestar owns an 80% WI and 61% NRI in these wells.  In Gonzales County, the Culpepper #3-2H, Culpepper #3-3H, and Culpepper #4-4H, which were also drilled on leasehold obtained in the Battlecat acquisition, were drilled to total measured depths of 15,380 feet, 15,325 feet and 15,280 feet, respectively.  Fracture stimulation is set to begin in August and flowback operations are forecast to begin in mid-September.  Lonestar owns an 80% WI and 60% NRI in these wells.

EAGLE FORD SHALE TREND- EASTERN REGION

Brazos & Robertson Counties - In Brazos County, no new wells were completed during the three months ended June 30, 2018. Lonestar is currently discussing drilling one well on our partners leasehold. Lonestar does not currently have drilling activity budgeted here in 2018.


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