Earthstone Energy (ESTE) Q3 Results - Nov 2

[dan_s]

My stock valuation is $36/share.

THE WOODLANDS, Texas, Nov. 2, 2022 /PRNewswire/ -- Earthstone Energy, Inc. (NYSE: ESTE) ("Earthstone", the "Company", "we", "our" or "us"), today announced financial and operating results for the three and nine months ended September 30, 2022.

Third Quarter 2022 and Other Recent Highlights

Repurchase of 3 million shares of Class A Common Stock for $43.7 million

Closed the Titus Acquisition on August 10, 2022

Net income attributable to Earthstone Energy, Inc. of $211.5 million, or $1.94 per Diluted Share

Net income of $299.3 million, or $2.09 per Adjusted Diluted Share

Adjusted net income(1) of $186.9 million, or $1.30 per Adjusted Diluted Share < Crushed my forecast of $147 million net income.

Adjusted EBITDAX(1) of $345.8 million, up 15% compared to 2Q 2022

Net cash provided by operating activities of $365.5 million < Compares to my forecast of $309.3 million operating cash flow.

Free Cash Flow of $174.2 million, up 6% compared to 2Q 2022

Average net production of 94,329 Boepd, up 22% compared to 2Q 2022 and 7% above the midpoint of 3Q 2022 guidance < Much better than my production forecast of 88,000 Boepd.

Capital expenditures of $147.2 million

Year to Date 2022 Highlights

Closed the Titus, Bighorn and Chisholm acquisitions

Net income attributable to Earthstone Energy, Inc. of $322.9 million, or $3.61 per Diluted Share

Net income of $465.5 million, or $3.66 per Adjusted Diluted Share(1)

Adjusted net income(1) of $438.8 million, or $3.45 per Adjusted Diluted Share(1)

Adjusted EBITDAX(1) of $769.8 million

Net cash provided by operating activities of $703.2 million

Free Cash Flow(1) of $374.0 million

Average net production of 69,203 Boepd(2)

Capital expenditures of $348.7 million

Robert J. Anderson, President and Chief Executive Officer of Earthstone, stated, "The Company delivered another outstanding quarter, with production, Adjusted EBITDAX, and Free Cash Flow each reaching record levels for the Company. During the quarter, we also closed on the previously announced Titus Acquisition in New Mexico, which has already contributed production, cash flow, and development inventory to the Company. This larger asset base, coupled with the continued success of our development program, drove our production to over 100,000 Boepd in September. Despite the continued volatility in commodity prices and inflationary pressures, this quarter's record results are indicative of the quality of the assets we have accumulated over the past two years. We are currently operating five drilling rigs across our more than 250,000-acre footprint. We continue to transform Earthstone with the significant operating scale we have built and our ability to leverage synergies and cost savings across our larger asset base. We are confident in our efforts to drive operating efficiencies from the higher operating cost assets acquired this year and expect the results of these efforts will be realized in future quarters."

Mr. Anderson continued, "Our third quarter well results further support the high-quality nature of our asset base. We brought nineteen operated wells online across the Delaware and Midland basins during the third quarter. Fourteen of these wells reached oil rates of over 1,000 barrels per day, with several wells approaching 1,500 barrels per day, highlighting the quality inventory we deliberately assembled through our focused acquisition efforts. Our outstanding financial and operational results are indicative of the high-quality nature of our assets which we believe will continue to create meaningful value for our shareholders. During the quarter, we used our substantial free cash flow to reduce debt, and we are pleased to end the quarter with a debt-to-annualized quarterly Adjusted EBITDAX ratio of 0.8x. With the significant Free Cash Flow we expect to generate over the coming quarters, our focus will be to continue reducing debt while evaluating accretive high-quality assets for consolidation, if available. However, we remain steadfast in our commitment to increasing shareholder value."

Operations Update

During the third quarter of 2022, for Company-operated activity, Earthstone commenced drilling 12 gross (12.0 net) wells and brought seven gross (6.3 net) wells online in the Midland Basin. The Company began drilling six gross (3.3 net) wells in the Delaware Basin and brought 12 gross (10.5 net) wells online.

In the Midland Basin, the Barnhart five-well pad in Irion County came online in August 2022 and had peak IP-30 average production of ~1,170 Boepd (~81% oil) per well. These wells averaged a completed lateral length of ~10,000 ft per well and are producing from the Wolfcamp B interval.

In the Delaware Basin, the Cletus and Salt Draw pads in Eddy County commenced production in early September. The two-well Cletus pad had peak IP-30 average production of ~1,370 Boepd (69% oil) per well, and both wells have completed lateral length of approximately 9,750 ft and are producing from the Wolfcamp A interval. The two-well Salt Draw pad had a peak IP-30 average production of ~1,570 Boepd (77% oil) per well from the Second Bone Springs interval. The two wells have a completed lateral length of approximately 4,700 ft per well. Additionally, in early September, the six drilled but uncompleted wells (Lonesome Dove and Cattlemen pads) acquired in the Titus acquisition in Lea County came online and had peak IP-30 average production of ~1,520 Boepd (73% oil) per well. All six wells had completed lateral length of approximately 7,700 ft per well and are producing from the First and Second Bone Springs interval.

The Company operated a four-rig drilling program in the third quarter with two rigs in each of the Midland and Delaware basins. Earthstone has recently added a fifth rig in the Delaware Basin and expects to continue a five-rig operated drilling program in 2023 with two rigs in the Midland Basin and three rigs in the Delaware Basin. For full year 2022 and only for Company-operated activity, Earthstone anticipates spudding 36 gross (32.4 net) wells and bringing 34 gross (30.7 net) wells online in the Midland Basin. In the Delaware Basin, the Company anticipates spudding 28 gross (18.2 net) wells and bringing 27 gross (19.3 net) wells online.

Updated 2022 Guidance

The Company is providing updated guidance for the fourth quarter of 2022 based on recent operating results and the current operating plan for the fourth quarter. On the strength of production from new wells and continued operational improvements which resulted in exceeding our third quarter production guidance, Earthstone is increasing its fourth quarter production guidance to a new range of 98,000 -102,000 Boepd (~43% oil). For the fourth quarter, the Company expects to incur $170-185 million in capital expenditures, resulting in 2022 capital expenditures of $519-534 million, representing a $12 million increase from the midpoint of prior guidance. The increase in expected capital expenditures is driven primarily by anticipated improvements in capital efficiency via an increase in the lateral length of fourth quarter wells by approximately 30% compared to our prior plan. To a lesser degree, Earthstone also anticipates higher non-operated capital activity in the fourth quarter compared to prior expectations.
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ESTE is my Top Pick in the Sweet 16

[Cliff_N]

Dan, there is lots of confusion on EPS number for Earthstone. People are missing the accepted $1.30 number and using other figures. Zacks had the consensus at $1.50, so they are showing a miss. Your analysis on the Weekly update video made it very clear why this stock is buy:

https://finance.yahoo.com/news/earthsto ... 04754.html

Still, the market is beating it down yesterday and today.

Best

Cliff