November 24, 2020

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Lonestar Announces Third Quarter 2020 Results

FORT WORTH, Texas--(BUSINESS WIRE)--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 September 30, 2020. HIGHLIGHTS Lonestar reported an 8% increase in net oil and gas production to 14,419 BOE/d during the three months ended September 30, 2020 (“3Q20”), compared to 13,339 BOE/d for the three months ended June 30, 2020 (“2Q20”). Production was comprised of 73% crude oil and NGL’s on an equivalent basis. Lonestar reported a net loss attributable to its common stockholders of $38.5 million during 3Q20 compared to a net loss of $42.9 million during 2Q20. 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 income for 3Q20 was $23.0 million. Most notable among these items include: a $48.4 million change in unrealized (non-cash) hedging loss on financial derivatives (‘mark-to-market’) and $12.4 million of non-recurring G&A expense related to restructuring expenses. Please see Non-GAAP Financial Measures at the end of this release for the definition of Adjusted Net Income (Loss), a reconciliation of net income (loss) before taxes to Adjusted Net Income (Loss), and the reasons for its use. Lonestar reported Adjusted EBITDAX for 3Q20 of $32.5 million. On a sequential basis, Adjusted EBITDAX remained flat due to stringent cost management and substantial hedging. Please see Non-GAAP Financial Measures at the end of this release for the definition of Adjusted EBITDAX, a reconciliation of net (loss) income attributable to common stockholders to Adjusted EBITDAX, and the reasons for its use. OPERATIONAL UPDATE Production- Lonestar reported an 8% increase in net oil and gas production to 14,419 BOE/d during the three months ended September 30, 2020. 3Q20 production volumes consisted of 7,190 barrels of oil per day (50%), 3,325 barrels of NGLs per day (23%), and 23,424 Mcf of natural gas per day (27%). This increase was attributable to Q2 shut-ins and the Hawkeye 14H-16H coming online. Wellhead Pricing- Lonestar’s wellhead crude oil price realization was $37.08/Bbl, which reflects a discount of $3.86/Bbl vs. WTI. Lonestar’s realized NGL price was $10.47/Bbl, or 26% of WTI. Lonestar’s realized wellhead natural gas price was $2.03 per Mcf, reflecting a $0.03 premium to Henry Hub. Revenues- Wellhead revenues improved by $14.9 million to $32.1 million, or 86%, compared to the three months ended June 30, 2020 (“2Q20”), primarily driven by a 80% increase in oil price realizations and a 59% increase in NGL price realizations, partially offset by a 29% decrease in natural gas price realizations. Expenses- In response to the downturn in oil and gas prices in 2020, Lonestar has made an organization-wide effort to reduce operating costs, focused on a combination of streamlining internal processes and seeking cost reductions from its vendors and service providers. Those organizational expense reductions are beginning to be reflected in the Company’s financial results. In the third quarter of 2020, total cash expenses, which include the cash portions of lease operating, gathering, processing, transportation, production taxes, general & administrative and interest expenses were $35.0 million for 3Q20, which reflects a 58% increase compared to $22.1 million in 2Q20. On a per-unit basis total cash expenses for 3Q20 and 2Q20 were $26.42 and $17.60, respectively. Excluding the incremental professional fees of $12.4 million incurred related to our restructuring, total cash expenses were $22.6 million for 3Q20, representing a 2% increase from the previous quarter. On a per-unit basis, 3Q20 total cash expenses per BOE were reduced by 4%, from $17.60 / BOE in 2Q20 to $17.07 / BOE in 3Q20. Lease Operating Expenses (“LOE”), excluding rig standby costs of $0.2 million, were $4.8 million for 3Q20, which was 18% higher than LOE of $4.0 million in 2Q20. On a unit-of-production basis, LOE per BOE increased 8% quarter over quarter to $3.59 per BOE in 3Q20. Increased LOE was driven entirely by the fact that Lonestar produced at 100% of capacity in 3Q20 after shutting in a substantial portion of its production in 2Q20. Gathering, Processing & Transportation Expenses (“GP&T”) for 3Q20 were $1.9 million, which was 116% higher than the GP&T of $0.9 million in the three months ended 2Q20. On a unit-of-production basis, GP&T increased 98% quarter over quarter from $0.72 per BOE in 2Q20 to $1.43 per BOE in 3Q20. Production and ad valorem taxes for 3Q20 were $2.0 million, which was 17% higher than production taxes of $1.7 million in 2Q20. On a unit-of-production basis, production and ad valorem taxes increased 6% quarter over quarter from $1.42 per BOE in 2Q20 to $1.50 per BOE in 3Q20. Increased production and ad valorem taxes were a function of higher wellhead revenues. General & Administrative Expenses (“G&A”) in 3Q20 were $15.8 million vs. $5.9 million in 2Q20. The significant increase was primarily due to incremental professional fees incurred related to our restructuring, totaling $12.4 million for the quarter. Excluding stock-based compensation, on a unit-of-production basis, G&A per BOE increased 177% quarter over quarter from $4.87 per BOE in 2Q20 to $11.92 per BOE in 3Q20. Excluding professional fees of $12.4 million related to restructuring, G&A per BOE decreased 40% quarter over quarter from $4.87 per BOE in 2Q20 to $2.57 per BOE in 3Q20. Interest expense was $11.4 million for 3Q20 vs. $10.5 million for 2Q20. Excluding amortization of debt issuance cost, premiums, and discounts, Interest expense increased 9% quarter over quarter from $9.9 million in 2Q20 to $10.8 million in 3Q20. On a unit-of-production basis, interest expense per BOE decreased 0.5% from $8.16 per BOE in 2Q20 to $8.12 per BOE in 3Q20. EAGLE FORD SHALE TREND - WESTERN REGION In our Western Region, production for 3Q20 averaged approximately 7,961 BOE per day, a 2% increase from 2Q20 production. Production consisted of 2,756 barrels of oil per day (35%), 2,367 barrels of NGL’s per day (30%) and 17,027 Mcf of natural gas per day (36%). The Western Region accounted for 55% of the Company’s production during the quarter. No new wells were completed during 3Q20. However, production increased in 3Q20 after the Company returned all of its wells to full production after shutting in certain wells during 2Q20 in reaction to historically low prices. EAGLE FORD SHALE TREND - CENTRAL REGION In our Central Region, 3Q20 production averaged approximately 6,242 BOE/d, a 18% increase compared to 2Q20 rates. Production consisted of 4,339 barrels of oil per day (70%), 893 barrels of NGL’s per day (14%), and 6,060 Mcf of natural gas per day (16%). The increase in production was largely driven by the shut-in of crude oil production volumes all of our wells in Gonzales, Karnes, Fayette and Lavaca Counties. The Central Region accounted for 43% of the Company’s production during the quarter. In June, Lonestar began flowback operations on the Hawkeye #14H, Hawkeye #15H, and Hawkeye #16H. These recorded maximum rates over a 30-day period (“Max-30 rates”) of 1,461 BOE/d, 86% of which was crude oil. Now, through their first 120 days of production, these wells have produced an average of 111,000 barrels of crude oil. Hawkeye #14H – With a 10,979’ perforated interval, the #14H recorded Max-30 rates of 1,186 Bbls/d oil, 87 Bbls/d of NGLs, and 625 Mcf/d, or 1,377 BOE/d on a three-stream basis and was achieved on a 30/64” choke. The #14H well has been onstream for more than 4 months now, and 120-day rates have averaged 868 Bbls/d oil, 49 Bbls/d of NGLs, and 353 Mcf/d, or 976 BOE/d on a three-stream basis. Hawkeye #15H – With a 10,608’ perforated interval, the #14H recorded Max-30 rates 1,372 Bbls/d oil, 101 Bbls/d of NGLs, and 729 Mcf/d, or 1,595 BOE/d on a three-stream basis and was achieved on a 30/64” choke. The #15H has been onstream for more than 4 months now, and 120-day rates of 970 Bbls/d oil, 55 Bbls/d of NGLs, and 394 Mcf/d, or 1,090 BOE/d on a three-stream basis and was achieved on a 30/64” choke. Hawkeye #16H – With a 9,885’ perforated interval, the #16H recorded Max-30 rates 1,217 Bbls/d oil, 88 Bbls/d of NGLs, and 635 Mcf/d, or 1,411 BOE/d on a three-stream basis and was achieved on a 30/64” choke. The #16H has been onstream for more than 4 months now, and 120-day rates of 958 Bbls/d oil, 53 Bbls/d of NGLs, and 381 Mcf/d, or 1,074 BOE/d on a three-stream basis and was achieved on a 30/64” choke. The Company holds a 50% working interest (“WI”) / 38% net revenue interest (“NRI”) in these wells. In July, the Company completed drilling operations on the Hawkeye #33H, Hawkeye #34H, and Hawkeye #35. These wells were drilled to total measured depths of 20,500, 20,358 feet, and 20,467, respectively, and are expected to have perforated intervals averaging approximately 10,800 feet. These wells are currently held in inventory as Drilled Uncompleted (DUC’s). Lonestar expects to hold a 50% WI / 37.5% NRI in these wells. EAGLE FORD SHALE TREND - EASTERN REGION In our Eastern Region, 3Q20 production averaged approximately 216 BOE/d, a 4% decrease over 2Q20 rates. Production consisted of 95 barrels of oil per day (44%), 65 barrels of NGL’s per day (30%), and 337 Mcf of natural gas per day (26%). The Eastern Region accounted for 2% of the Company’s production during the quarter. ABOUT LONESTAR RESOURCES US INC. Lonestar is an independent oil and natural gas company, focused on the development, production, and acquisition of unconventional oil, NGLs, and natural gas properties in the Eagle Ford Shale in Texas, where we have accumulated approximately 70,876 gross (51,484 net) acres in what we believe to be the formation’s crude oil and condensate windows, as of September 30, 2020. For more information, please visit www.lonestarresources.com. Cautionary & Forward-Looking Statements Lonestar Resources US Inc. cautions that this press release contains forward-looking statements, including, but not limited to; Lonestar’s execution of its growth strategies; growth in Lonestar’s leasehold, reserves and asset value; and Lonestar’s ability to create shareholder value. These statements involve substantial known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following: volatility of oil, natural gas and NGL prices, and potential write-down of the carrying values of crude oil and natural gas properties; inability to successfully replace proved producing reserves; substantial capital expenditures required for exploration, development and exploitation projects; potential liabilities resulting from operating hazards, natural disasters or other interruptions; risks related using the latest available horizontal drilling and completion techniques; uncertainties tied to lengthy period of development of identified drilling locations; unexpected delays and cost overrun related to the development of estimated proved undeveloped reserves; concentration risk related to properties, which are located primarily in the Eagle Ford Shale of South Texas; loss of lease on undeveloped leasehold acreage that may result from lack of development or commercialization; inaccuracies in assumptions made in estimating proved reserves; our limited control over activities in properties Lonestar does not operate; potential inconsistency between the present value of future net revenues from our proved reserves and the current market value of our estimated oil and natural gas reserves; risks related to derivative activities; losses resulting from title deficiencies; risks related to health, safety and environmental laws and regulations; additional regulation of hydraulic fracturing; reduced demand for crude oil, natural gas and NGLs resulting from conservation measures and technological advances; inability to acquire adequate supplies of water for our drilling operations or to dispose of or recycle the used water economically and in an environmentally safe manner; climate change laws and regulations restricting emissions of “greenhouse gases” that may increase operating costs and reduce demand for the crude oil and natural gas; fluctuations in the differential between benchmark prices of crude oil and natural gas and the reference or regional index price used to price actual crude oil and natural gas sales; and the other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 13, 2020, as well as other documents that we may file from time to time with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. The forward-looking statements in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release. Lonestar Resources US Inc. (Debtor-In-Possession) Unaudited Condensed Consolidated Balance Sheets (In thousands, except par value and share) September 30, 2020 December 31, 2019 Assets Current assets Cash and cash equivalents $ 36,611 $ 3,137 Accounts receivable Oil, natural gas liquid and natural gas sales 14,304 15,991 Joint interest owners and others, net 1,594 1,310 Derivative financial instruments — 5,095 Prepaid expenses and other 9,936 2,208 Total current assets 62,445 27,741 Property and equipment Oil and gas properties, using the successful efforts method of accounting Proved properties 1,099,521 1,050,168 Unproved properties 77,367 76,462 Other property and equipment 21,914 21,401 Less accumulated depreciation, depletion, amortization and impairment (723,351 ) (464,671 ) Property and equipment, net 475,451 683,360 Accounts receivable – related party 6,023 5,816 Derivative financial instruments — 1,754 Other non-current assets 2,052 2,108 Total assets $ 545,971 $ 720,779 Liabilities and Stockholders' (Deficit) Equity Current liabilities Accounts payable $ 10 $ 33,355 Accounts payable – related party — 189 Oil, natural gas liquid and natural gas sales payable — 14,811 Accrued liabilities 429 26,905 Derivative financial instruments — 8,564 Current maturities of long-term debt 285,000 247,000 Total current liabilities 285,439 330,824 Long-term liabilities Long-term debt 8,781 255,068 Asset retirement obligations 7,583 7,055 Deferred tax liabilities, net — 931 Warrant liability — 129 Warrant liability – related party — 235 Derivative financial instruments — 1,898 Other non-current liabilities — 3,752 Total long-term liabilities 16,364 269,068 Liabilities subject to compromise 309,193 — Total liabilities 610,996 599,892 Commitments and contingencies Stockholders' (deficit) equity Class A voting common stock, $0.001 par value, 100,000,000 shares authorized, 25,375,314 and 24,945,594 shares issued and outstanding, respectively 142,655 142,655 Series A-1 convertible participating preferred stock, $0.001 par value, 104,893 and 100,328 shares issued and outstanding, respectively — — Additional paid-in capital 176,012 175,738 Accumulated deficit (383,692 ) (197,506 ) Total stockholders' (deficit) equity (65,025 ) 120,887 Total liabilities and stockholders' (deficit) equity $ 545,971 $ 720,779 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements Lonestar Resources US Inc. (Debtor-In-Possession) Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Revenues Oil sales $ 24,524 $ 42,187 $ 66,510 $ 120,496 Natural gas liquid sales 3,202 3,439 7,565 10,381 Natural gas sales 4,383 7,519 12,285 15,224 Total revenues 32,109 53,145 86,360 146,101 Expenses Lease operating 4,763 8,948 16,430 23,472 Gas gathering, processing and transportation 1,891 1,107 4,916 3,223 Production and ad valorem taxes 1,994 3,017 6,084 8,126 Depreciation, depletion and amortization 18,256 24,635 59,184 64,120 Loss on sale and disposal of oil and gas properties — 483 1,254 33,530 Impairment of oil and gas properties — — 199,908 — General and administrative 15,808 4,124 24,664 12,345 Other expense (income) 121 (2 ) (15 ) (4 ) Total expenses 42,833 42,312 312,425 144,812 (Loss) income from operations (10,724 ) 10,833 (226,065 ) 1,289 Other (expense) income Interest expense (11,399 ) (11,295 ) (33,521 ) (32,730 ) Change in fair value of warrants — (100 ) 363 594 (Loss) gain on derivative financial instruments (9,656 ) 21,546 70,373 (5,177 ) Reorganization items, net (3,072 ) — (3,072 ) — Total other (expense) income (24,127 ) 10,151 34,143 (37,313 ) (Loss) income before income taxes (34,851 ) 20,984 (191,922 ) (36,024 ) Income tax benefit (expense) 49 (4,767 ) 5,736 6,966 Net (loss) income (34,802 ) 16,217 (186,186 ) (29,058 ) Preferred stock dividends — (2,159 ) (4,566 ) (6,336 ) Undeclared cumulative preferred stock dividends (3,671 ) — (3,671 ) — Net (loss) income attributable to common stockholders $ (38,473 ) $ 14,058 $ (194,423 ) $ (35,394 ) Net (loss) income per common share Basic $ (1.52 ) $ 0.34 $ (7.70 ) $ (1.42 ) Diluted $ (1.52 ) $ 0.33 $ (7.70 ) $ (1.42 ) Weighted average common shares outstanding Basic 25,361,361 24,933,853 25,238,972 24,852,994 Diluted 25,361,361 25,331,810 25,238,972 24,852,994 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. Lonestar Resources US Inc. Unaudited Condensed Consolidated Statements of Cash Flows (In thousands) Nine Months Ended September 30, 2020 2019 Cash flows from operating activities Net loss $ (186,186 ) $ (29,058 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, depletion and amortization 59,184 64,120 Stock-based compensation (2,001 ) 1,294 Deferred taxes (931 ) (6,983 ) (Gain) loss on derivative financial instruments (70,373 ) 5,177 Settlements of derivative financial instruments 66,761 (3,858 ) Non-cash reorganization items 3,072 — Impairment of oil and natural gas properties 199,908 — Loss (gain) on disposal of property and equipment 83 (17 ) Loss on sale of oil and gas properties 1,254 33,530 Non-cash interest expense 2,002 1,822 Change in fair value of warrants (363 ) (594 ) Changes in operating assets and liabilities: Accounts receivable (5,413 ) (8,330 ) Prepaid expenses and other assets (2,004 ) (1,102 ) Accounts payable and accrued expenses 17,738 (3,128 ) Net cash provided by operating activities 82,731 52,873 Cash flows from investing activities Acquisition of oil and gas properties (2,186 ) (5,239 ) Development of oil and gas properties (97,973 ) (119,273 ) Proceeds from sale of oil and gas properties 11,913 11,470 Purchases of other property and equipment (1,014 ) (3,527 ) Net cash used in investing activities (89,260 ) (116,569 ) Cash flows from financing activities Proceeds from borrowings 48,157 114,000 Payments on borrowings (8,154 ) (52,218 ) Net cash provided by financing activities 40,003 61,782 Net increase (decrease) in cash and cash equivalents 33,474 (1,914 ) Cash and cash equivalents, beginning of the period 3,137 5,355 Cash and cash equivalents, end of the period $ 36,611 $ 3,441 Supplemental information: Cash paid for interest $ 23,831 $ 28,125 Non-cash investing and financing activities: Undeclared cumulative dividends on preferred stock $ 3,671 $ — Change in asset retirement obligation 272 (292 ) Change in liabilities for capital expenditures (37,269 ) 9,098 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. NON-GAAP FINANCIAL MEASURES (Unaudited) Reconciliation of Non-GAAP Financial Measures Adjusted EBITDAX Adjusted EBITDAX is not a measure of net income as determined by GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net (loss) income attributable to common stockholders before depreciation, depletion, amortization and accretion, exploration costs, non-recurring costs, loss (gain) on sales of oil and natural gas properties, impairment of oil and gas properties, stock-based compensation, interest expense, income tax (benefit) expense, rig standby expense, other income (expense), unrealized (gain) loss on derivative financial instruments and unrealized (gain) loss on warrants. Management believes Adjusted EBITDAX provides useful information to investors because it assists investors in the evaluation of the Company’s operating performance and comparison of the results of the Company’s operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net (loss) income attributable to common stockholders in arriving at Adjusted EBITDAX to eliminate the impact of certain non-cash items or because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net (loss) income attributable to common stockholders as determined in accordance with GAAP. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. The Company’s computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies. The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net (loss) income attributable to common stockholders for each of the periods indicated. Three Months Ended September 30, Nine Months Ended September 30, ($ in thousands) 2020 2019 2020 2019 Net (loss) income attributable to common stockholders $ (38,473 ) $ 14,058 $ (194,423 ) $ (35,394 ) Income tax (benefit) expense (49 ) 4,767 5,736 (6,966 ) Interest expense(1) 15,070 13,454 41,758 39,066 Exploration expense — — — 190 Depreciation, depletion and amortization 18,256 24,635 59,184 64,120 EBITDAX (5,196 ) 56,914 (87,745 ) 61,016 Rig standby expense 183 135 617 552 Non-recurring costs(2) 12,400 — 14,280 — Stock-based compensation — 942 (1,729 ) 1,970 Loss on sale of oil and gas properties — 483 1,254 33,530 Impairment of oil and gas properties — — 199,908 — Reorganization Items 3,072 — 3,072 — Unrealized loss (gain) on derivative financial instruments 48,354 (22,098 ) (2,439 ) (349 ) Realized gain on derivative financial instruments(3) (26,474 ) — (26,474 ) — Unrealized loss (gain) on warrants — 100 (363 ) (593 ) Other expense (income) 117 576 (48 ) 1,435 Adjusted EBITDAX $ 32,456 $ 37,052 $ 100,333 $ 97,561 (1) Interest expense also includes paid and undeclared dividends on Series A Preferred Stock (2) Non-recurring professional fees (3) Represents realized gains for hedges terminated in September 2020 that originally would have settled subsequent to period end. Contacts Chase Booth, 817-921-1889 Read full story here

FORT WORTH, Texas–(BUSINESS WIRE)–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 September 30, 2020.

HIGHLIGHTS

  • Lonestar reported an 8% increase in net oil and gas production to 14,419 BOE/d during the three months ended September 30, 2020 (“3Q20”), compared to 13,339 BOE/d for the three months ended June 30, 2020 (“2Q20”). Production was comprised of 73% crude oil and NGL’s on an equivalent basis.
  • Lonestar reported a net loss attributable to its common stockholders of $38.5 million during 3Q20 compared to a net loss of $42.9 million during 2Q20. 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 income for 3Q20 was $23.0 million. Most notable among these items include: a $48.4 million change in unrealized (non-cash) hedging loss on financial derivatives (‘mark-to-market’) and $12.4 million of non-recurring G&A expense related to restructuring expenses. Please see Non-GAAP Financial Measures at the end of this release for the definition of Adjusted Net Income (Loss), a reconciliation of net income (loss) before taxes to Adjusted Net Income (Loss), and the reasons for its use.
  • Lonestar reported Adjusted EBITDAX for 3Q20 of $32.5 million. On a sequential basis, Adjusted EBITDAX remained flat due to stringent cost management and substantial hedging. Please see Non-GAAP Financial Measures at the end of this release for the definition of Adjusted EBITDAX, a reconciliation of net (loss) income attributable to common stockholders to Adjusted EBITDAX, and the reasons for its use.

OPERATIONAL UPDATE

  • Production- Lonestar reported an 8% increase in net oil and gas production to 14,419 BOE/d during the three months ended September 30, 2020. 3Q20 production volumes consisted of 7,190 barrels of oil per day (50%), 3,325 barrels of NGLs per day (23%), and 23,424 Mcf of natural gas per day (27%). This increase was attributable to Q2 shut-ins and the Hawkeye 14H-16H coming online.
  • Wellhead Pricing- Lonestar’s wellhead crude oil price realization was $37.08/Bbl, which reflects a discount of $3.86/Bbl vs. WTI. Lonestar’s realized NGL price was $10.47/Bbl, or 26% of WTI. Lonestar’s realized wellhead natural gas price was $2.03 per Mcf, reflecting a $0.03 premium to Henry Hub.
  • Revenues- Wellhead revenues improved by $14.9 million to $32.1 million, or 86%, compared to the three months ended June 30, 2020 (“2Q20”), primarily driven by a 80% increase in oil price realizations and a 59% increase in NGL price realizations, partially offset by a 29% decrease in natural gas price realizations.
  • Expenses- In response to the downturn in oil and gas prices in 2020, Lonestar has made an organization-wide effort to reduce operating costs, focused on a combination of streamlining internal processes and seeking cost reductions from its vendors and service providers. Those organizational expense reductions are beginning to be reflected in the Company’s financial results. In the third quarter of 2020, total cash expenses, which include the cash portions of lease operating, gathering, processing, transportation, production taxes, general & administrative and interest expenses were $35.0 million for 3Q20, which reflects a 58% increase compared to $22.1 million in 2Q20. On a per-unit basis total cash expenses for 3Q20 and 2Q20 were $26.42 and $17.60, respectively. Excluding the incremental professional fees of $12.4 million incurred related to our restructuring, total cash expenses were $22.6 million for 3Q20, representing a 2% increase from the previous quarter. On a per-unit basis, 3Q20 total cash expenses per BOE were reduced by 4%, from $17.60 / BOE in 2Q20 to $17.07 / BOE in 3Q20.

    • Lease Operating Expenses (“LOE”), excluding rig standby costs of $0.2 million, were $4.8 million for 3Q20, which was 18% higher than LOE of $4.0 million in 2Q20. On a unit-of-production basis, LOE per BOE increased 8% quarter over quarter to $3.59 per BOE in 3Q20. Increased LOE was driven entirely by the fact that Lonestar produced at 100% of capacity in 3Q20 after shutting in a substantial portion of its production in 2Q20.
    • Gathering, Processing & Transportation Expenses (“GP&T”) for 3Q20 were $1.9 million, which was 116% higher than the GP&T of $0.9 million in the three months ended 2Q20. On a unit-of-production basis, GP&T increased 98% quarter over quarter from $0.72 per BOE in 2Q20 to $1.43 per BOE in 3Q20.
    • Production and ad valorem taxes for 3Q20 were $2.0 million, which was 17% higher than production taxes of $1.7 million in 2Q20. On a unit-of-production basis, production and ad valorem taxes increased 6% quarter over quarter from $1.42 per BOE in 2Q20 to $1.50 per BOE in 3Q20. Increased production and ad valorem taxes were a function of higher wellhead revenues.
    • General & Administrative Expenses (“G&A”) in 3Q20 were $15.8 million vs. $5.9 million in 2Q20. The significant increase was primarily due to incremental professional fees incurred related to our restructuring, totaling $12.4 million for the quarter. Excluding stock-based compensation, on a unit-of-production basis, G&A per BOE increased 177% quarter over quarter from $4.87 per BOE in 2Q20 to $11.92 per BOE in 3Q20. Excluding professional fees of $12.4 million related to restructuring, G&A per BOE decreased 40% quarter over quarter from $4.87 per BOE in 2Q20 to $2.57 per BOE in 3Q20.
    • Interest expense was $11.4 million for 3Q20 vs. $10.5 million for 2Q20. Excluding amortization of debt issuance cost, premiums, and discounts, Interest expense increased 9% quarter over quarter from $9.9 million in 2Q20 to $10.8 million in 3Q20. On a unit-of-production basis, interest expense per BOE decreased 0.5% from $8.16 per BOE in 2Q20 to $8.12 per BOE in 3Q20.

EAGLE FORD SHALE TREND – WESTERN REGION

In our Western Region, production for 3Q20 averaged approximately 7,961 BOE per day, a 2% increase from 2Q20 production. Production consisted of 2,756 barrels of oil per day (35%), 2,367 barrels of NGL’s per day (30%) and 17,027 Mcf of natural gas per day (36%). The Western Region accounted for 55% of the Company’s production during the quarter. No new wells were completed during 3Q20. However, production increased in 3Q20 after the Company returned all of its wells to full production after shutting in certain wells during 2Q20 in reaction to historically low prices.

EAGLE FORD SHALE TREND – CENTRAL REGION

In our Central Region, 3Q20 production averaged approximately 6,242 BOE/d, a 18% increase compared to 2Q20 rates. Production consisted of 4,339 barrels of oil per day (70%), 893 barrels of NGL’s per day (14%), and 6,060 Mcf of natural gas per day (16%). The increase in production was largely driven by the shut-in of crude oil production volumes all of our wells in Gonzales, Karnes, Fayette and Lavaca Counties. The Central Region accounted for 43% of the Company’s production during the quarter.

In June, Lonestar began flowback operations on the Hawkeye #14H, Hawkeye #15H, and Hawkeye #16H. These recorded maximum rates over a 30-day period (“Max-30 rates”) of 1,461 BOE/d, 86% of which was crude oil. Now, through their first 120 days of production, these wells have produced an average of 111,000 barrels of crude oil.

  • Hawkeye #14H – With a 10,979’ perforated interval, the #14H recorded Max-30 rates of 1,186 Bbls/d oil, 87 Bbls/d of NGLs, and 625 Mcf/d, or 1,377 BOE/d on a three-stream basis and was achieved on a 30/64” choke. The #14H well has been onstream for more than 4 months now, and 120-day rates have averaged 868 Bbls/d oil, 49 Bbls/d of NGLs, and 353 Mcf/d, or 976 BOE/d on a three-stream basis.
  • Hawkeye #15H – With a 10,608’ perforated interval, the #14H recorded Max-30 rates 1,372 Bbls/d oil, 101 Bbls/d of NGLs, and 729 Mcf/d, or 1,595 BOE/d on a three-stream basis and was achieved on a 30/64” choke. The #15H has been onstream for more than 4 months now, and 120-day rates of 970 Bbls/d oil, 55 Bbls/d of NGLs, and 394 Mcf/d, or 1,090 BOE/d on a three-stream basis and was achieved on a 30/64” choke.
  • Hawkeye #16H – With a 9,885’ perforated interval, the #16H recorded Max-30 rates 1,217 Bbls/d oil, 88 Bbls/d of NGLs, and 635 Mcf/d, or 1,411 BOE/d on a three-stream basis and was achieved on a 30/64” choke. The #16H has been onstream for more than 4 months now, and 120-day rates of 958 Bbls/d oil, 53 Bbls/d of NGLs, and 381 Mcf/d, or 1,074 BOE/d on a three-stream basis and was achieved on a 30/64” choke.

The Company holds a 50% working interest (“WI”) / 38% net revenue interest (“NRI”) in these wells.

In July, the Company completed drilling operations on the Hawkeye #33H, Hawkeye #34H, and Hawkeye #35. These wells were drilled to total measured depths of 20,500, 20,358 feet, and 20,467, respectively, and are expected to have perforated intervals averaging approximately 10,800 feet. These wells are currently held in inventory as Drilled Uncompleted (DUC’s). Lonestar expects to hold a 50% WI / 37.5% NRI in these wells.

EAGLE FORD SHALE TREND – EASTERN REGION

In our Eastern Region, 3Q20 production averaged approximately 216 BOE/d, a 4% decrease over 2Q20 rates. Production consisted of 95 barrels of oil per day (44%), 65 barrels of NGL’s per day (30%), and 337 Mcf of natural gas per day (26%). The Eastern Region accounted for 2% of the Company’s production during the quarter.

ABOUT LONESTAR RESOURCES US INC.

Lonestar is an independent oil and natural gas company, focused on the development, production, and acquisition of unconventional oil, NGLs, and natural gas properties in the Eagle Ford Shale in Texas, where we have accumulated approximately 70,876 gross (51,484 net) acres in what we believe to be the formation’s crude oil and condensate windows, as of September 30, 2020. For more information, please visit www.lonestarresources.com.

Cautionary & Forward-Looking Statements

Lonestar Resources US Inc. cautions that this press release contains forward-looking statements, including, but not limited to; Lonestar’s execution of its growth strategies; growth in Lonestar’s leasehold, reserves and asset value; and Lonestar’s ability to create shareholder value. These statements involve substantial known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following: volatility of oil, natural gas and NGL prices, and potential write-down of the carrying values of crude oil and natural gas properties; inability to successfully replace proved producing reserves; substantial capital expenditures required for exploration, development and exploitation projects; potential liabilities resulting from operating hazards, natural disasters or other interruptions; risks related using the latest available horizontal drilling and completion techniques; uncertainties tied to lengthy period of development of identified drilling locations; unexpected delays and cost overrun related to the development of estimated proved undeveloped reserves; concentration risk related to properties, which are located primarily in the Eagle Ford Shale of South Texas; loss of lease on undeveloped leasehold acreage that may result from lack of development or commercialization; inaccuracies in assumptions made in estimating proved reserves; our limited control over activities in properties Lonestar does not operate; potential inconsistency between the present value of future net revenues from our proved reserves and the current market value of our estimated oil and natural gas reserves; risks related to derivative activities; losses resulting from title deficiencies; risks related to health, safety and environmental laws and regulations; additional regulation of hydraulic fracturing; reduced demand for crude oil, natural gas and NGLs resulting from conservation measures and technological advances; inability to acquire adequate supplies of water for our drilling operations or to dispose of or recycle the used water economically and in an environmentally safe manner; climate change laws and regulations restricting emissions of “greenhouse gases” that may increase operating costs and reduce demand for the crude oil and natural gas; fluctuations in the differential between benchmark prices of crude oil and natural gas and the reference or regional index price used to price actual crude oil and natural gas sales; and the other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 13, 2020, as well as other documents that we may file from time to time with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. The forward-looking statements in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

Lonestar Resources US Inc. (Debtor-In-Possession)

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except par value and share)

September 30,

2020

December 31,

2019

Assets

Current assets

Cash and cash equivalents

$

36,611

$

3,137

Accounts receivable

Oil, natural gas liquid and natural gas sales

14,304

15,991

Joint interest owners and others, net

1,594

1,310

Derivative financial instruments

5,095

Prepaid expenses and other

9,936

2,208

Total current assets

62,445

27,741

Property and equipment

Oil and gas properties, using the successful efforts method of accounting

Proved properties

1,099,521

1,050,168

Unproved properties

77,367

76,462

Other property and equipment

21,914

21,401

Less accumulated depreciation, depletion, amortization and impairment

(723,351

)

(464,671

)

Property and equipment, net

475,451

683,360

Accounts receivable – related party

6,023

5,816

Derivative financial instruments

1,754

Other non-current assets

2,052

2,108

Total assets

$

545,971

$

720,779

Liabilities and Stockholders' (Deficit) Equity

Current liabilities

Accounts payable

$

10

$

33,355

Accounts payable – related party

189

Oil, natural gas liquid and natural gas sales payable

14,811

Accrued liabilities

429

26,905

Derivative financial instruments

8,564

Current maturities of long-term debt

285,000

247,000

Total current liabilities

285,439

330,824

Long-term liabilities

Long-term debt

8,781

255,068

Asset retirement obligations

7,583

7,055

Deferred tax liabilities, net

931

Warrant liability

129

Warrant liability – related party

235

Derivative financial instruments

1,898

Other non-current liabilities

3,752

Total long-term liabilities

16,364

269,068

Liabilities subject to compromise

309,193

Total liabilities

610,996

599,892

Commitments and contingencies

Stockholders' (deficit) equity

Class A voting common stock, $0.001 par value, 100,000,000 shares authorized, 25,375,314 and 24,945,594 shares issued and outstanding, respectively

142,655

142,655

Series A-1 convertible participating preferred stock, $0.001 par value, 104,893 and 100,328 shares issued and outstanding, respectively

Additional paid-in capital

176,012

175,738

Accumulated deficit

(383,692

)

(197,506

)

Total stockholders' (deficit) equity

(65,025

)

120,887

Total liabilities and stockholders' (deficit) equity

$

545,971

$

720,779

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Lonestar Resources US Inc. (Debtor-In-Possession)

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenues

Oil sales

$

24,524

$

42,187

$

66,510

$

120,496

Natural gas liquid sales

3,202

3,439

7,565

10,381

Natural gas sales

4,383

7,519

12,285

15,224

Total revenues

32,109

53,145

86,360

146,101

Expenses

Lease operating

4,763

8,948

16,430

23,472

Gas gathering, processing and transportation

1,891

1,107

4,916

3,223

Production and ad valorem taxes

1,994

3,017

6,084

8,126

Depreciation, depletion and amortization

18,256

24,635

59,184

64,120

Loss on sale and disposal of oil and gas properties

483

1,254

33,530

Impairment of oil and gas properties

199,908

General and administrative

15,808

4,124

24,664

12,345

Other expense (income)

121

(2

)

(15

)

(4

)

Total expenses

42,833

42,312

312,425

144,812

(Loss) income from operations

(10,724

)

10,833

(226,065

)

1,289

Other (expense) income

Interest expense

(11,399

)

(11,295

)

(33,521

)

(32,730

)

Change in fair value of warrants

(100

)

363

594

(Loss) gain on derivative financial instruments

(9,656

)

21,546

70,373

(5,177

)

Reorganization items, net

(3,072

)

(3,072

)

Total other (expense) income

(24,127

)

10,151

34,143

(37,313

)

(Loss) income before income taxes

(34,851

)

20,984

(191,922

)

(36,024

)

Income tax benefit (expense)

49

(4,767

)

5,736

6,966

Net (loss) income

(34,802

)

16,217

(186,186

)

(29,058

)

Preferred stock dividends

(2,159

)

(4,566

)

(6,336

)

Undeclared cumulative preferred stock dividends

(3,671

)

(3,671

)

Net (loss) income attributable to common stockholders

$

(38,473

)

$

14,058

$

(194,423

)

$

(35,394

)

Net (loss) income per common share

Basic

$

(1.52

)

$

0.34

$

(7.70

)

$

(1.42

)

Diluted

$

(1.52

)

$

0.33

$

(7.70

)

$

(1.42

)

Weighted average common shares outstanding

Basic

25,361,361

24,933,853

25,238,972

24,852,994

Diluted

25,361,361

25,331,810

25,238,972

24,852,994

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Lonestar Resources US Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

Nine Months Ended September 30,

2020

2019

Cash flows from operating activities

Net loss

$

(186,186

)

$

(29,058

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation, depletion and amortization

59,184

64,120

Stock-based compensation

(2,001

)

1,294

Deferred taxes

(931

)

(6,983

)

(Gain) loss on derivative financial instruments

(70,373

)

5,177

Settlements of derivative financial instruments

66,761

(3,858

)

Non-cash reorganization items

3,072

Impairment of oil and natural gas properties

199,908

Loss (gain) on disposal of property and equipment

83

(17

)

Loss on sale of oil and gas properties

1,254

33,530

Non-cash interest expense

2,002

1,822

Change in fair value of warrants

(363

)

(594

)

Changes in operating assets and liabilities:

Accounts receivable

(5,413

)

(8,330

)

Prepaid expenses and other assets

(2,004

)

(1,102

)

Accounts payable and accrued expenses

17,738

(3,128

)

Net cash provided by operating activities

82,731

52,873

Cash flows from investing activities

Acquisition of oil and gas properties

(2,186

)

(5,239

)

Development of oil and gas properties

(97,973

)

(119,273

)

Proceeds from sale of oil and gas properties

11,913

11,470

Purchases of other property and equipment

(1,014

)

(3,527

)

Net cash used in investing activities

(89,260

)

(116,569

)

Cash flows from financing activities

Proceeds from borrowings

48,157

114,000

Payments on borrowings

(8,154

)

(52,218

)

Net cash provided by financing activities

40,003

61,782

Net increase (decrease) in cash and cash equivalents

33,474

(1,914

)

Cash and cash equivalents, beginning of the period

3,137

5,355

Cash and cash equivalents, end of the period

$

36,611

$

3,441

Supplemental information:

Cash paid for interest

$

23,831

$

28,125

Non-cash investing and financing activities:

Undeclared cumulative dividends on preferred stock

$

3,671

$

Change in asset retirement obligation

272

(292

)

Change in liabilities for capital expenditures

(37,269

)

9,098

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

NON-GAAP FINANCIAL MEASURES (Unaudited)

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDAX

Adjusted EBITDAX is not a measure of net income as determined by GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net (loss) income attributable to common stockholders before depreciation, depletion, amortization and accretion, exploration costs, non-recurring costs, loss (gain) on sales of oil and natural gas properties, impairment of oil and gas properties, stock-based compensation, interest expense, income tax (benefit) expense, rig standby expense, other income (expense), unrealized (gain) loss on derivative financial instruments and unrealized (gain) loss on warrants.

Management believes Adjusted EBITDAX provides useful information to investors because it assists investors in the evaluation of the Company’s operating performance and comparison of the results of the Company’s operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net (loss) income attributable to common stockholders in arriving at Adjusted EBITDAX to eliminate the impact of certain non-cash items or because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net (loss) income attributable to common stockholders as determined in accordance with GAAP. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. The Company’s computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net (loss) income attributable to common stockholders for each of the periods indicated.

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands)

2020

2019

2020

2019

Net (loss) income attributable to common stockholders

$

(38,473

)

$

14,058

$

(194,423

)

$

(35,394

)

Income tax (benefit) expense

(49

)

4,767

5,736

(6,966

)

Interest expense(1)

15,070

13,454

41,758

39,066

Exploration expense

190

Depreciation, depletion and amortization

18,256

24,635

59,184

64,120

EBITDAX

(5,196

)

56,914

(87,745

)

61,016

Rig standby expense

183

135

617

552

Non-recurring costs(2)

12,400

14,280

Stock-based compensation

942

(1,729

)

1,970

Loss on sale of oil and gas properties

483

1,254

33,530

Impairment of oil and gas properties

199,908

Reorganization Items

3,072

3,072

Unrealized loss (gain) on derivative financial instruments

48,354

(22,098

)

(2,439

)

(349

)

Realized gain on derivative financial instruments(3)

(26,474

)

(26,474

)

Unrealized loss (gain) on warrants

100

(363

)

(593

)

Other expense (income)

117

576

(48

)

1,435

Adjusted EBITDAX

$

32,456

$

37,052

$

100,333

$

97,561

(1) Interest expense also includes paid and undeclared dividends on Series A Preferred Stock

(2) Non-recurring professional fees

(3) Represents realized gains for hedges terminated in September 2020 that originally would have settled subsequent to period end.

Contacts

Chase Booth, 817-921-1889

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