Earthstone Energy (ESTE) Q2 Results - Aug 4

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dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Earthstone Energy (ESTE) Q2 Results - Aug 4

Post by dan_s »

MY FIRST IMPRESSION: This is a VERY BULLISH update, primarily because Q2 actual production and their fresh production guidance for Q3 are much higher than what I have in my model. I will be updating my forecast/valuation model on Friday and my pre-release valuation of $35/share is likely to go up.
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THE WOODLANDS, Texas, Aug. 4, 2022 /PRNewswire/ -- Earthstone Energy, Inc. (NYSE: ESTE) ("Earthstone", the "Company", "we", "our" or "us"), today announced financial and operating results for the three and six months ended June 30, 2022.

Second Quarter 2022 Highlights

Executed the Titus Acquisition PSAs on June 27, 2022, which are expected to close in mid-August 2022

On April 12, 2022, closed a $550 million offering of 8.0% senior unsecured notes due 2027

Closed the Bighorn Acquisition on April 14, 2022

Issued $280 million of Preferred Stock in a private placement on April 14, 2022, which was converted into 25,225,225 shares of our Class A common stock on July 6, 2022

Net income attributable to Earthstone Energy, Inc. of $144.9 million, or $1.46 per Diluted Share

Net income of $218.0 million, or $1.60 per Adjusted Diluted Share

Adjusted net income of $175.7 million, or $1.29 per Adjusted Diluted Share < < Compares to my forecast of $136.9 million Net Income.

Adjusted EBITDAX of $300.9 million, up 144% compared to 1Q 2022 < Beat my Q2 EBITDAX forecast of $285 million.

Net cash provided by operating activities of $254.7 million

Free Cash Flow of $164.8 million, up 362% compared to 1Q 2022

Key Stat: Average daily net production of 77,125 Boepd, up 117% compared to 1Q 2022 < Beat my Q2 forecast of 71,500 Boepd.

Capital expenditures of $119.5 million

Year to Date 2022 Highlights

Closed the Chisholm Acquisition on February 15, 2022

Net income attributable to Earthstone Energy, Inc. of $111.4 million, or $1.37 per Diluted Share

Net income of $166.1 million, or $1.40 per Adjusted Diluted Share

Adjusted net income of $251.9 million, or $2.12 per Adjusted Diluted Share

Adjusted EBITDAX of $424.0 million

Net cash provided by operating activities of $337.7 million

Free Cash Flow of $200.5 million

Average daily net production of 56,432 Boepd

Capital expenditures of $201.6 million

Management Comments

Robert J. Anderson, President and Chief Executive Officer of Earthstone, stated, "Our strong second quarter results reflect the continued positive impacts of our consolidation strategy. Over the last year and a half, we have become a larger scale, low-cost producer and have grown production volumes multiple times over while also adding to our robust drilling inventory through accretive, well-priced acquisitions. This ongoing transformation enabled us to substantially increase Free Cash Flow in the second quarter by approximately 362%, sequentially, to $165 million driven by a step change in our daily production and the continued strength of commodity prices."

"We have also been pleased with our ability to optimize our operations, identify synergies within our recent acquisitions, and manage our costs in this challenging inflationary environment," added Anderson. "We continue to drive down our LOE and cash G&A per BOE which was, on a combined basis, 5% lower in the second quarter compared to the first quarter. We are looking forward to closing on the northern Delaware Basin assets from the Titus Acquisition later this month and incorporating this high-quality inventory into our development plans.
The Titus Acquisition is expected to increase our total production to near 100,000 Boepd upon close, and we expect the assets will contribute an incremental 30% to our Adjusted EBITDAX. In the near-term, we intend to continue using our significant Free Cash Flow to rapidly pay down debt in pursuit of our target Debt / LQA Adjusted EBITDAX ratio of less than 1.0x by year-end. As always, we will remain focused on executing our growing operational program and generating record levels of free cash flow, which we believe will drive meaningful shareholder value," concluded Anderson.

Updated 2022 Guidance

We are providing updated guidance for 2022, which accounts for the expected closing of the Titus Acquisition in mid-August 2022, increased drilling and completion activity, a recent non-operated asset sale and updated cost expectations. Estimated second half of 2022 capital expenditures are $300-325 million, which implies full year 2022 capital expenditure guidance of $502-527 million. Incremental activity including related infrastructure accounts for a 14% increase at the midpoint of our prior full year 2022 capital guidance while cost inflation on our base drilling program accounts for a 7% increase. The updated capital guidance assumes addition of a fifth rig during the fall which will be focused on the Delaware Basin, bringing the total rig count in the Delaware Basin to three rigs, while maintaining two rigs in the Midland Basin. We expect to complete an additional six gross operated wells on the Titus Acquisition assets and spud an additional four gross operated wells within our expanded capital program. Production guidance for the second half of the year incorporates the expected near-term closing of the Titus Acquisition as well as a recent non-operated asset sale. The Company anticipates third quarter production to be 86-90 MBoepd (~41% oil). Furthermore, we expect production to average 96-100 MBoepd (~44% oil) in the fourth quarter with a full impact from the Titus Acquisition.
Dan Steffens
Energy Prospectus Group
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