Lonestar Boosts Proved Reserves to Over 100 Million BOE

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cmm3rd
Posts: 420
Joined: Tue Jan 08, 2013 4:44 pm

Lonestar Boosts Proved Reserves to Over 100 Million BOE

Post by cmm3rd »

Lonestar Boosts Proved Reserves to Over 100 Million BOE

FORT WORTH, Texas - Lonestar Resources US Inc. (NASDAQ: LONE) (together with its subsidiaries, "Lonestar," "our" or the "Company") announced that its proved reserves increased to a record 100.6 million barrels of oil equivalent ("MMBOE") at December 31, 2019 calculated using SEC guidelines. All of the Company's proved reserves are located in the Eagle Ford Shale.

Lonestar's proved reserves at December 31, 2019 are comprised of 49.8 million barrels of crude oil and condensate, 24.9 million barrels of natural gas liquids ("NGL's"), and 155.9 billion cubic feet of natural gas. By energy content, Lonestar's proved reserves are weighted 74% to crude oil, condensate and NGL's. The SEC PV-10 for Lonestar's proved reserves was $834.2 million. See Table 1 for details.

In 2019, Lonestar added a total of 19.6 MMBOE, which consisted of 13.9 MMBOE through extensions and discoveries, and 5.6 MMBOE through positive reserve revisions based on performance. These reserve additions were equivalent to 353% of Lonestar's 2019 production.
Lonestar's proved reserves were reduced by the sale of its Pirate asset (-2.2 MMBOE), negative revisions related to reduction in SEC-mandated prices (-1.2 MMBOE), and a reclassification of certain drilling locations that were moved to probable reserves in accordance with the SEC's 5-year rule (-3.4 MMBOE).
Lonestar's proved developed reserves increased 23% to 33.0 MMBOE and the PV-10 associated with its Proved Developed reserves was $421.4 million using SEC guidelines.
Lonestar estimates that its capital expenditures related to oil and gas activities totaled $171.8 million for the year ended December 31, 2019. Lonestar's all-sources finding and development ("F&D") costs were $11.44 per BOE. Excluding the negative revisions related to price and reclassification, Lonestar's finding and development costs were $8.77 per BOE.
Lonestar's 2019 results continue an extended streak of economic performance. Including 2019 results, Lonestar's five-year reserves replacement ratio has been 549% and the five-year all-sources F&D costs averages $8.26 per BOE, with drillbit only F&D costs averaging $11.80 per BOE over the five-year period.
In 2019, Lonestar's proved & probable reserves increased to 122.7 MMBOE, which is comprised of 65.1 million barrels of crude oil and condensate, 28.4 million barrels of natural gas liquids, and 175.5 billion cubic feet of natural gas. Using SEC guidelines, PV-10 for proved & probable reserves exceeds $960.6 billion.
Lonestar's proved & probable reserves included 250 drilling locations which were assigned reserves by the Company's independent petroleum engineers, equating to approximately 15 years of drilling activity at Lonestar's current rate of drilling.

Lonestar's Chief Executive Officer, Frank D. Bracken, III commented, "In a market in which our industry is capital constrained, 2019 was another year of capital-efficient growth for Lonestar, driven by strong results from our drilling program, which saw the majority of our new-drills exceed third party forecasts, resulting in positive reserve revisions.

Without producing property acquisitions, our drilling program still generated organic reserve growth via a combination of 1) new wells outperforming their prior bookings resulting in upward revisions to both PDP's and PUD's; and 2) drilling wells on newly-leased acreage resulting in reserve additions. In doing so, we extended our track-record of low-cost reserve growth, registering exceptional all-sources finding and development costs of $8.77 per BOE while replacing 353% of 2019 production." Bracken concluded, "With virtually all of our crude oil hedged in 2020 at $56.95/bbl and the bulk of our natural gas hedged in 2020 at $2.58/MMBTU, we have a high degree of cash flow certainty that we will judiciously deploy in our 2020 drilling and completion program, and we expect to do so at lower well costs which we expect to yield continued growth in production and EBITDAX."

The table below summarizes Lonestar’s year-end proved reserves and PV-10 by region as determined by the Company’s independent petroleum engineers, W.D. Von Gonten & Co. Petroleum Engineers. Based on rules of the U.S. Securities and Exchange Commission, for the year ended December 31, 2019, Lonestar’s proved reserves were estimated using the 12-month average price calculated as the unweighted arithmetic average of the spot price on the first day of each month preceding the 12 months prior to the end of the reporting period. This methodology resulted in an average NYMEX oil price of $55.69 per barrel and an average NYMEX natural gas price of $2.58 per million British Thermal Units ("MMBTU"), a decrease of 15% for crude oil and an decrease of 17% for natural gas, as compared to an average of oil price of $65.56 per barrel and an average natural gas price of $3.10 per MMBTU used to estimate Lonestar’s proved reserves for the year ended December 31, 2018.


Table 1: Proved Reserves and PV-10
(As of December 31, 2019)


Crude Oil NGLs Natural Gas Total PV-10
Region (MMBbls) (MMBbls) (Bcf) (MMBoe) ($MM)
Western Eagle Ford 13.2 15.1 97.8 44.7 $335.5
Central Eagle Ford 35.4 8.8 53.9 53.2 $487.0
Eastern Eagle Ford 1.2 0.9 4.2 2.8 $11.7
Total 49.8 24.9 155.9 100.6 $834.2



At December 31, 2019, based on SEC guidelines, Lonestar’s PV-10 was $834.2 million. The PV-10 of the proved developed reserves calculated on the same basis was $421.4 million and PV-10 of our proved undeveloped ("PUD") reserves was $412.8 million. The future development costs associated with Lonestar’s PUD’s equates to $11.55 per BOE, which is consistent with our five-year finding and onstream costs.


Table 2: Changes in Proved Reserves
(As of December 31, 2019)


Crude Oil NGLs Natural Gas Total
(MMBbls) (MMBbls) (Bcf) (MMBoe)
Proved Reserves - December 31, 2018 53.5 19.9 120.2 93.4
Revisions of previous estimates (0.0) 2.4 19.3 5.6
Extensions and Discoveries 4.3 4.7 29.6 13.9
Purchase of Reserves in Place 0.0 0.0 0.0 0.0
Sales of Reserves in Place (2.2) 0.0 0.0 (2.2)
Price Deck Revision (0.7) (0.2) (1.5) (1.2)
Reclass. to unproved under SEC 5-year rule (2.4) (0.5) (2.8) (3.4)
Production (2.7) (1.4) (8.9) (5.5)
Proved Reserves - December 31, 2019 49.8 24.9 155.9 100.6
Proved Developed - December 31, 2019 15.9 8.3 52.6 33.0

Lonestar’s capital expenditures totaled $171.8 million for the year ended December 31, 2019. These expenditures included $159.0 million for drilling and completion costs, $5.6 million for leasehold acquisition costs, $0.2 million for 3-D seismic data and $6.9 million for the construction of fieldwide infrastructure and included in development costs below.


Table 3: Costs Incurred In Oil & Gas Property Acquisition, Exploration and Development Activities
(For the year ended December 31, 2019)


Total
Property Acquisition Costs ($MM)
Proved property acquisition costs $3.9
Unproved property acquisition costs $1.7
Total property acquisition costs $5.6
Exploration costs $0.2
Development costs $165.9
Total costs incurred $171.8

Table 4: Proved & Probable Reserves and PV-10 at SEC Pricing
(As of December 31, 2019)

Crude Oil NGLs Natural Gas Total PV-10
Region (MMBbls) (MMBbls) (Bcf) (MMBoe) ($MM)
Western Eagle Ford 15.2 15.7 101.0 47.7 $347.7
Central Eagle Ford 45.4 11.0 66.4 67.4 $582.2
Eastern Eagle Ford 4.5 1.7 8.1 7.6 $30.7
Total 65.1 28.4 175.5 122.7 $960.6


About Lonestar
Lonestar is an independent oil and natural gas company, focused on the development, production and acquisition of unconventional oil, natural gas liquids and natural gas properties in the Eagle Ford Shale in Texas.
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Lonestar Boosts Proved Reserves to Over 100 Million BOE

Post by dan_s »

Lonestar's net asset value ("NAV") based only on P1 reserves:

$ 49,049,000 : Current assets as of 9/30/2019 10Q
+834,200,000 : PV10 of Proved Reserves per 3rd party reserve report
-585,394,000 : Total Debt as of 9/30/2019 10Q
- 98,120,000 : Estimated payment to take out the preferred stock
$199,735,000 = Net Asset Value of just P1 reserves
/ by 24,934,000 shares of common stock outstanding as of 9/30/2019 10Q
$8.01 NAV per share of common stock assuming the preferred stock is taken out with cash.

This compares to my "Fair Value Estimate" of $7.75 which is just 3X operating cash flow assuming preferred stock dividends are paid in cash.

Note that the calculation above gives zero value to Lonestar's undeveloped leasehold. It has a lot of probable reserves (P2) that do have market value.

It is very important to note that Lonestar's hedges totally insulate it from the recent decline in crude oil prices. The company sells its oil into the physical market at close to LLS prices (a premium to WTI) and the hedges are settle in cash based on WTI prices. Plus, I now think the NGL prices used in my model for Lonestar are too low.
Dan Steffens
Energy Prospectus Group
ironman
Posts: 6
Joined: Fri Aug 28, 2015 3:35 pm

Re: Lonestar Boosts Proved Reserves to Over 100 Million BOE

Post by ironman »

Well, there is one massive problem in the quarter.

Capital expenditures were apparently way way out of control.

The company had guided to $15-$18 mill in Q4 D&C. looks like cap-ex was roughly $56 million in the qtr, a horrific overspend and that is the reason why it is down so much. Frank better have a good explanation. Need to see the actual financials.
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