Memorial Resource Development Corp. (Nasdaq:MRD)
announced today its operating and financial results for the three
months ended June 30, 2016. Highlights from the quarter
include:
- Increased average daily production 68% to 451 MMcfe/d for the
second quarter 2016 compared to 268 MMcfe/d for the second quarter
2015
- Entered into an Agreement and Plan of Merger (the “Merger
Agreement”) on May 15, 2016 with Range Resources Corporation
(“Range”) and Medina Merger Sub, Inc. (“Merger Sub”), a wholly
owned subsidiary of Range, pursuant to which Range will acquire MRD
in exchange for shares of Range common stock
- Closed the divestiture of Memorial Production Partners GP LLC
("MEMP GP"), the general partner of MEMP, to Memorial Production
Partners LP (Nasdaq:MEMP) on June 1, 2016
- MRD has no ownership interest in MEMP's outstanding common
units, incentive distribution rights ("IDRs") or general partner
interest
Second Quarter 2016 Results
Net production increased 68% year-over-year to
451 MMcfe/d for the second quarter 2016 compared to 268 MMcfe/d for
the second quarter 2015. Second quarter 2016 net production
consisted of 345 MMcf/d of natural gas (77%), 13.7 MBbls/d of
natural gas liquids (“NGLs”) (18%) and 3.9 MBbls/d of crude oil
(5%).
Total revenues for the second quarter 2016 were
$99.0 million compared to $78.6 million for the second quarter
2015. Total revenues were higher primarily due to increased
production, which were partially offset by lower commodity prices.
Production increased 16.6 Bcfe (approximately 68%) primarily due to
drilling activities in North Louisiana. The average realized sales
price decreased $0.82 per Mcfe (approximately 25%) due to lower
commodity prices. The volume and pricing variance contributed
to an approximate $53.7 million increase which was partially offset
by a $33.3 million decrease in revenues. Total revenues do not
include the impact of realized hedges.
Average realized prices for the quarter ending
June 30, 2016 and 2015, before the effect of commodity derivatives
and other financial instruments, are presented below:
|
|
Q2’16 |
|
|
Q2’15 |
|
|
PercentChange |
Natural gas (per
Mcf) |
|
$ |
1.96 |
|
|
$ |
2.59 |
|
|
|
(24 |
)% |
NGL (per Bbl) |
|
$ |
18.18 |
|
|
$ |
20.99 |
|
|
|
(13 |
)% |
Oil (per Bbl) |
|
$ |
42.08 |
|
|
$ |
53.18 |
|
|
|
(21 |
)% |
Total (per Mcfe) |
|
$ |
2.41 |
|
|
$ |
3.23 |
|
|
|
(25 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average realized prices for the quarter ending
June 30, 2016 and 2015, after the effect of commodity derivatives
and other financial instruments, are presented below:
|
|
Q2’16 |
|
|
Q2’15 |
|
|
PercentChange |
Natural gas (per
Mcf) |
|
$ |
3.22 |
|
|
$ |
3.86 |
|
|
|
(17 |
)% |
NGL (per Bbl) |
|
$ |
33.16 |
|
|
$ |
32.60 |
|
|
|
2 |
% |
Oil (per Bbl) |
|
$ |
74.60 |
|
|
$ |
73.00 |
|
|
|
2 |
% |
Total (per Mcfe) |
|
$ |
4.12 |
|
|
$ |
4.77 |
|
|
|
(14 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expense ("LOE") for the second
quarter 2016 was $8.2 million, or $0.20 per Mcfe, compared to $3.9
million, or $0.16 per Mcfe, for the second quarter 2015. The
increase in LOE on a per unit basis is largely attributable to
increased workover expenses and saltwater disposal costs associated
with the significant new completion activity during the first
quarter 2016.
Gathering, processing and transportation
(“GP&T”) expense for the second quarter 2016 was $36.8 million,
or $0.90 per Mcfe, versus $18.1 million, or $0.74 per Mcfe, in the
second quarter 2015. The per unit increase was largely due to
other fees associated with securing long-term access to
high-efficiency cryogenic facilities. MRD now has the option
to adjust ethane recovery to continuously optimize its barrel
composition maximizing the value of its NGL stream.
Taxes other than income were $3.0 million for
the second quarter 2016, or $0.07 per Mcfe, compared to $3.1
million, or $0.13 per Mcfe, for the second quarter 2015.
Second quarter 2016 taxes other than income decreased on a per unit
basis compared to second quarter 2015 due to a higher percentage of
production receiving tax exemptions related to horizontal
drilling.
General and administrative ("G&A") expense
for the second quarter 2016 was $24.0 million, or $0.59 per Mcfe,
compared to $10.3 million, or $0.42 per Mcfe, for the second
quarter 2015. Non-cash, stock-based compensation for the
quarter was $10.5 million, or $0.26 per Mcfe. Notably, $7.3
million, or $0.18 per Mcfe, of MRD’s total non-cash, stock-based
compensation during the quarter was accelerated and associated with
the closing of the divestiture of MEMP GP. Transaction
related costs which included expenses associated with the
divestiture of MEMP GP and the proposed merger with Range were $6.2
million, or $0.15 per Mcfe. Excluding non-cash, stock-based
compensation and transaction related costs, G&A expense for the
second quarter 2016 was $7.3 million, or $0.18 per Mcfe.
Incentive unit compensation expense of $74.3
million and $16.1 million for the second quarter 2016 and 2015,
respectively, was recognized and offset by a deemed capital
contribution from MRD Holdco LLC, a holding company that, together
with a group, owns a majority of MRD’s common
stock.
Depreciation, depletion, and amortization
expense for the second quarter 2016 was $65.6 million compared to
$35.8 million for the second quarter 2015. The increase was
primarily due to an increase in production volumes.
MRD recognized net losses on commodity
derivative instruments of $90.6 million during the second quarter
2016, which consisted of $61.8 million of cash settlement receipts
and offset by a $152.4 million decrease in the fair value of open
hedge positions. Net losses on commodity derivative
instruments of $30.5 million were recognized during the second
quarter 2015, consisting of $37.5 million of cash settlement
receipts and a $68.0 million decrease in the fair value of open
hedge positions.
Net interest expense during the second quarter
2016 was $12.8 million, including amortization of deferred
financing fees of approximately $0.8 million. This compares to net
interest expense during the second quarter 2015 of $9.6 million,
including amortization of deferred financing fees of approximately
$0.7 million.
MRD recorded a net loss from continuing
operations of $195.8 million during the second quarter 2016
compared to a net loss from continuing operations of $26.6 million
during the previous year period.
MRD increased Adjusted EBITDA(1) 37% to $113.5
million for the second quarter 2016 compared to $82.8 million for
the second quarter 2015.
MRD reported Adjusted Net Income(1) for the
second quarter 2016 of $21.3 million compared to $17.3 million for
the second quarter 2015.
D&C capital expenditures, excluding
leasehold and including facilities and capital workovers, were
approximately $70.7 million in the second quarter 2016 and compares
to $156.5 million in the first quarter 2016.
Operational Update
During the second quarter 2016, MRD brought
online 3 gross horizontal wells targeting the Lower Red
interval. Year-to-date, MRD has completed drilling the
vertical “pilot hole” portion of two expansion acreage wells and
has spud its third expansion well. For reservoir evaluation
purposes, MRD drilled these wells vertically through the full Lower
Cotton Valley section, ran extensive open hole log suites and
recovered sidewall cores for petrophysical analysis. These
wells have been constructed such that they can readily be
re-entered for the drilling of their horizontal lateral
sections. MRD expects production results from these wells by
the end of the year.
Financial Update
Total debt outstanding as of June 30, 2016 was
approximately $1.1 billion, including $514.0 million of debt
outstanding under MRD’s revolving credit facility and $600.0
million of senior notes due 2022. As of June 30, 2016, MRD’s
liquidity consisted of $486.0 million of availability under its
revolving credit facility. MRD’s net debt to annualized
second quarter 2016 Adjusted EBITDA ratio was 2.5 times at
quarter-end 2016. MRD expects the available borrowings under
its revolving credit facility to provide sufficient liquidity to
finance anticipated working capital and capital expenditure
requirements.
On June 1, 2016, MRD closed the previously
announced divestiture of Memorial Production Partners GP LLC ("MEMP
GP"), the general partner of MEMP, to Memorial Production Partners
LP (Nasdaq:MEMP). MEMP GP is the general partner of MEMP and held
the general partner interest and 50% of the IDRs of MEMP. MRD has
no ownership interest in MEMP's outstanding common units, IDRs or
general partner interest. MRD is now fully separated from MEMP
subject to a transition services agreement to manage certain
post-closing separation expenses and transition services.
Hedging Update
MRD utilizes its hedging program to mitigate
financial risks and the effects of commodity price volatility.
Total hedged production in the second quarter of 2016 was 34.0
Bcfe, or 82.9% of second quarter production of 41.0 Bcfe, which
settled at an average hedge price of $4.88 per Mcfe. As of June 30,
2016, MRD has hedged approximately 100% of its expected remaining
2016 production (using MRD’s updated 2016 guidance range announced
on May 10, 2016). As of June 30, 2016, the mark-to-market
value of MRD’s hedge book was approximately $162.4 million.
The following table reflects MRD’s hedged
volumes and corresponding weighted-average price, as of July 28,
2016.
|
|
Remaining |
|
|
|
|
|
2016 |
|
|
|
2017 |
|
Natural Gas Hedge Contracts: |
|
|
|
|
Total natural gas volumes hedged
(MMBtu) |
|
|
64,920,000 |
|
|
|
98,040,000 |
|
Total weighted-average
price(1) |
|
$ |
3.76 |
|
|
$ |
3.78 |
|
|
|
|
|
|
Crude Oil Hedge Contracts: |
|
|
|
|
Total crude oil volumes hedged
(Bbl) |
|
|
516,264 |
|
|
|
336,000 |
|
Total weighted-average
price(1) |
|
$ |
93.57 |
|
|
$ |
84.70 |
|
|
|
|
|
|
Natural Gas Liquids Hedge Contracts: |
|
|
|
|
Total natural gas liquids volumes
hedged (Bbl) |
|
|
2,867,601 |
|
|
|
– |
|
Total weighted-average
price(1) |
|
$ |
40.27 |
|
|
|
– |
|
|
|
|
|
|
Total Hedge Contracts: |
|
|
|
|
Total hedged production
(MMBtue) |
|
|
85,223,188 |
|
|
|
100,056,000 |
|
Total weighted-average
price(1) |
|
$ |
4.79 |
|
|
$ |
3.99 |
|
Percent of expected production
hedged(2) |
|
~100% |
|
|
|
|
|
|
|
Note: 2016 hedge volumes represent the period July – December
2016 |
1. Utilizing the
mid-point for collars |
2. Using the
mid-point of MRD’s 2016 guidance ranges |
|
|
|
|
|
For more detailed information about MRD's
hedging program as of July 28, 2016, please see the "Commodity
Hedging Overview" presentation on MRD's website,
www.memorialrd.com, under the Investor Relations section.
Proposed Merger with Range Resources
Corporation
On May 15, 2016, MRD, Range and Merger Sub
entered into the Merger Agreement pursuant to which Range will
acquire MRD in exchange for shares of Range common stock. The
Merger Agreement provides that, upon the terms and subject to the
conditions set forth therein, Merger Sub will be merged with and
into MRD, with MRD continuing as the surviving entity and a wholly
owned subsidiary of Range. Under the terms of the Merger
Agreement, each issued and outstanding share of MRD common stock
will be converted into the right to receive 0.375 of a share of
Range common stock. Following the approval by MRD
shareholders and Range stockholders and certain closing conditions,
the merger is expected to close during the third quarter 2016.
Additional Information
MRD will not host an earnings conference
call. MRD’s financial statements and related footnotes will
be available in its Quarterly Report on Form 10-Q for the quarter
ended June 30, 2016, which will be filed with the U.S. Securities
and Exchange Commission (“SEC”) on July 28, 2016.
(1) Adjusted EBITDA and Adjusted Net Income are
non-GAAP financial measures. Please see the reconciliation to the
most comparable measures calculated in accordance with GAAP in the
"Use of Non-GAAP Financial Measures" section of this press
release.
About Memorial Resource Development
Corp.
Memorial Resource Development Corp. is an
independent natural gas and oil company engaged in the acquisition,
exploration and development of natural gas and oil properties in
North Louisiana. For more information, please visit our
website at www.memorialrd.com.
Important Information for Investors and
Shareholders
This communication does not constitute an offer
to buy or sell or the solicitation of an offer to buy or sell any
securities or a solicitation of any vote or approval. This
communication relates to a proposed business combination between
Range Resources Corporation “Range” and MRD.
In connection with the proposed transaction,
Range has filed with the Securities and Exchange Commission (the
“SEC”) a registration statement on Form S-4 (333-211994) on June
13, 2016, as amended by Amendment No. 1 thereto as filed with the
SEC on July 14, 2016, that includes a joint proxy statement of
Range and MRD and also constitutes a prospectus of Range. Each of
Range and MRD also plan to file other relevant documents with the
SEC regarding the proposed transactions. No offering of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the U.S. Securities Act of 1933, as
amended. The definitive joint proxy statement/prospectus(es) for
Range and/or MRD will be mailed to shareholders of Range and/or
MRD, as applicable.
INVESTORS AND SECURITY HOLDERS OF RANGE AND MRD
ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION
STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT
MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION.
Investors and security holders will be able to
obtain free copies of these documents (if and when available) and
other documents containing important information about Range and
MRD, once such documents are filed with the SEC through the website
maintained by the SEC at http://www.sec.gov. Copies of the
documents filed with the SEC by Range will be available free of
charge on Range’s internet website at
http://www.rangeresources.com or by contacting Range’s
Investor Relations Department by email at
lsando@rangeresources.com, damend@rangeresources.com,
mfreeman@rangeresources.com, or by phone at 817-869-4267. Copies of
the documents filed with the SEC by MRD will be available free of
charge on MRD’s internet website at
http://www.memorialrd.com or by phone at 713-588-8339.
Range, MRD and certain of their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies in respect of the proposed
transaction. Information about the directors and executive
officers of MRD is set forth in MRD’s proxy statement for its 2016
annual meeting of shareholders, which was filed with the SEC on
April 1, 2016. Information about the directors and executive
officers of Range is set forth in its proxy statement for its 2016
annual meeting of shareholders, which was filed with the SEC on
April 8, 2016. These documents can be obtained free of charge from
the sources indicated above.
Other information regarding the participants in
the proxy solicitations and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus and other
relevant materials to be filed with the SEC when such materials
become available. Investors should read the joint proxy
statement/prospectus carefully when it becomes available before
making any voting or investment decisions. You may obtain free
copies of these documents from Range or MRD using the sources
indicated above.
Cautionary Statement Concerning
Forward-Looking Statements
This press release includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Forward-looking statements can be
identified by words such as “anticipates,” “intends,” “will,”
“plans,” “seeks,” “believes,” “estimates,” “expects” and similar
references to future periods. Such forward-looking statements
are subject to a number of risks and uncertainties, many of which
are beyond MRD’s control. All statements, other than historical
facts included in this press release, that address activities,
events or developments that MRD expects or anticipates will or may
occur in the future, including such things as MRD’s future capital
expenditures (including the amount and nature thereof), business
strategy and measures to implement strategy, competitive strengths,
goals, expansion and growth of MRD’s business and operations,
plans, market conditions, references to future success, references
to intentions as to future matters and other such matters are
forward-looking statements. All forward-looking statements speak
only as of the date of this press release. Although MRD believes
that the plans, intentions and expectations reflected in or
suggested by the forward-looking statements are reasonable, there
is no assurance that these plans, intentions or expectations will
be achieved. Therefore, actual outcomes and results could
materially differ from what is expressed, implied or forecast in
such statements.
MRD cautions you that these forward-looking
statements are subject to risks and uncertainties, most of which
are difficult to predict and many of which are beyond MRD’s
control, incident to the exploration for and development,
production, gathering and sale of natural gas and oil. These risks
include, but are not limited to: commodity price volatility;
inflation; lack of availability of drilling and production
equipment and services; environmental risks; drilling and other
operating risks; regulatory changes; the uncertainty inherent in
estimating natural gas and oil reserves and in projecting future
rates of production, cash flow and access to capital; and the
timing of development expenditures. Information concerning
these and other factors can be found in MRD’s filings with the SEC,
including its Forms 10-K, 10-Q and 8-K. Consequently, all of the
forward-looking statements made in this press release are qualified
by these cautionary statements and there can be no assurances that
the actual results or developments anticipated by MRD will be
realized, or even if realized, that they will have the expected
consequences to or effects on MRD, its business or operations. MRD
has no intention, and disclaims any obligation, to update or revise
any forward-looking statements, whether as a result of new
information, future results or otherwise.
Initial production rates are subject to decline
over time and should not be regarded as reflective of sustained
production levels.
Use of Non-GAAP Financial
Measures
This press release and accompanying schedules
include the non-GAAP financial measures of Adjusted EBITDA and
Adjusted Net Income. The accompanying schedules provide a
reconciliation of these non-GAAP financial measures to their most
directly comparable financial measure calculated and presented in
accordance with GAAP. MRD's non-GAAP financial measures should not
be considered as alternatives to GAAP measures such as net income,
operating income, net cash flows provided by operating activities
or any other measure of financial performance calculated and
presented in accordance with GAAP. MRD's non-GAAP financial
measures may not be comparable to similarly-titled measures of
other companies because they may not calculate such measures in the
same manner as MRD does.
Memorial Resource Development
Corp.
Operating Data
|
|
|
|
For the Three Months |
|
|
|
|
Ended June 30, |
|
|
|
|
|
2016 |
|
|
|
2015 |
|
|
Production
volumes: |
|
|
|
|
|
|
Oil Sales
(MBbls) |
|
353 |
|
|
|
315 |
|
|
|
NGL Sales
(MBbls) |
|
1,250 |
|
|
|
669 |
|
|
|
Natural Gas
Sales (MMcf) |
|
31,377 |
|
|
|
18,469 |
|
|
|
Total (MMcfe) |
|
40,995 |
|
|
|
24,373 |
|
|
|
Total (MMcfe/d) |
|
450.5 |
|
|
|
267.8 |
|
|
|
|
|
|
|
|
|
Average
unit costs per Mcfe: |
|
|
|
|
|
Lease
operating expense |
$ |
0.20 |
|
|
$ |
0.16 |
|
|
|
Gathering,
processing and transportation |
$ |
0.90 |
|
|
$ |
0.74 |
|
|
|
Taxes other
than income |
$ |
0.07 |
|
|
$ |
0.13 |
|
|
|
General and
administrative expenses |
$ |
0.59 |
|
|
$ |
0.42 |
|
|
|
Cash
settlements received (paid) on expired commodity hedges |
$ |
1.71 |
|
|
$ |
1.54 |
|
|
|
|
|
|
|
|
|
|
|
Memorial Resource Development
Corp.
Statements of Operations
|
|
|
|
For the Three Months |
|
|
|
|
Ended June 30, |
|
(Amounts in
$000s) |
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
Oil &
natural gas sales |
$ |
98,986 |
|
|
$ |
78,605 |
|
|
|
|
|
|
|
|
|
Costs and
Expenses: |
|
|
|
|
|
|
Lease
operating |
|
8,189 |
|
|
|
3,854 |
|
|
|
Gathering,
processing & transportation |
|
23,353 |
|
|
|
14,289 |
|
|
|
Gathering,
processing & transportation - affiliate |
|
13,456 |
|
|
|
3,813 |
|
|
|
Exploration |
|
4,612 |
|
|
|
2,230 |
|
|
|
Taxes other
than income |
|
2,991 |
|
|
|
3,140 |
|
|
|
Depreciation, depletion and amortization |
|
65,558 |
|
|
|
35,827 |
|
|
|
General and
administrative |
|
24,021 |
|
|
|
10,323 |
|
|
|
Incentive
unit compensation expense |
|
74,329 |
|
|
|
16,116 |
|
|
|
Accretion
of asset retirement obligations |
|
156 |
|
|
|
93 |
|
|
|
Loss on
commodity derivatives instruments |
|
90,617 |
|
|
|
30,463 |
|
|
|
Loss on
sale of properties |
|
- |
|
|
|
50 |
|
|
|
Total costs and expenses |
|
307,282 |
|
|
|
120,198 |
|
|
|
|
|
|
|
|
|
Operating
income (loss) |
|
(208,296 |
) |
|
|
(41,593 |
) |
|
|
|
|
|
|
|
|
Other
Income (Expense): |
|
|
|
|
|
Interest
expense, net |
|
(12,767 |
) |
|
|
(9,613 |
) |
|
|
Other, net |
|
|
(112 |
) |
|
|
(52 |
) |
|
|
Total other
income (expense) |
|
(12,879 |
) |
|
|
(9,665 |
) |
|
|
|
|
|
|
|
|
|
Income tax
benefit (expense) |
|
(221,175 |
) |
|
|
(51,258 |
) |
|
|
|
|
|
|
|
|
Income tax
benefit (expense) |
|
25,342 |
|
|
|
24,644 |
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing
operations |
$ |
(195,833 |
) |
|
$ |
(26,614 |
) |
|
|
|
|
|
|
|
|
Discontinued Operations: |
|
|
|
|
|
Income
(loss) before income taxes |
|
(122,425 |
) |
|
|
(112,983 |
) |
|
|
Income tax
benefit (expense) |
|
- |
|
|
|
(876 |
) |
|
|
Net income (loss) from
discontinued operations |
|
(122,425 |
) |
|
|
(113,859 |
) |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
(318,258 |
) |
|
|
(140,473 |
) |
|
|
Net income (loss)
attributable to noncontrolling interest |
|
(122,297 |
) |
|
|
(113,771 |
) |
|
|
Net income
(loss) attributable to MRD |
|
(195,961 |
) |
|
|
(26,702 |
) |
|
|
Net (income) loss from
discontinued operations |
|
128 |
|
|
|
88 |
|
|
|
Net
income (loss) from continuing
operations |
$ |
(195,833 |
) |
|
$ |
(26,614 |
) |
|
|
available to
common stockholders |
|
|
|
|
|
Memorial Resource Development
Corp.
Calculation of Adjusted
EBITDA
We evaluate performance based on Adjusted
EBITDA. Adjusted EBITDA is defined as net income (loss) from
continuing operations, plus interest expense; debt extinguishment
costs; income tax expense; depreciation, depletion and
amortization; impairment of long-lived properties; accretion of
asset retirement obligations; losses on commodity derivative
contracts and cash settlements received; cash settlements on other
financial instruments; losses on sale of properties; stock-based
compensation; incentive-based compensation expenses; exploration
costs; equity loss from MEMP; cash distributions from MEMP;
transaction related costs; and other non-routine items, less
interest income; income tax benefit; gains on commodity derivative
contracts and cash settlements paid; equity income from MEMP; gains
on sale of assets and other non-routine items.
|
|
|
|
For the Three Months |
|
|
|
|
Ended June 30, |
|
(Amounts in
$000s) |
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Net income
(loss) from continuing operations |
$ |
(195,833 |
) |
|
$ |
(26,614 |
) |
|
|
|
|
|
|
|
|
Add
(Deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
12,767 |
|
|
|
9,613 |
|
|
|
Income tax
benefit |
|
(25,342 |
) |
|
|
(24,644 |
) |
|
|
Depreciation, depletion and amortization |
|
65,558 |
|
|
|
35,827 |
|
|
|
Accretion
of asset retirement obligations |
|
156 |
|
|
|
93 |
|
|
|
Loss on
commodity derivatives instruments |
|
90,617 |
|
|
|
30,463 |
|
|
|
Cash
settlements received (paid) on expired commodity derivatives |
|
69,911 |
|
|
|
37,539 |
|
|
|
and other financial
instruments |
|
|
|
|
Transaction
related costs |
|
6,179 |
|
|
|
126 |
|
|
|
Stock-based
compensation (LTIPs) |
|
10,521 |
|
|
|
1,957 |
|
|
|
Incentive
unit compensation expense |
|
74,329 |
|
|
|
16,116 |
|
|
|
Loss on
sale of properties |
|
- |
|
|
|
50 |
|
|
|
Exploration
costs |
|
4,612 |
|
|
|
2,230 |
|
|
|
Cash
distributions from MEMP |
|
- |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
113,475 |
|
|
$ |
82,831 |
|
|
Memorial Resource Development
Corp.
Calculation of Adjusted Net Income from
Continuing Operations
Adjusted Net Income from Continuing Operations
is a supplemental non-GAAP financial measure that is used by
external users of MRD’s financial statements. We define Adjusted
Net Income as net income from continuing operations excluding the
impact of certain items including gains or losses on commodity
derivative instruments not yet settled, cash settlements on other
financial instruments, gains or losses on sales of properties, debt
extinguishment costs, equity income in MEMP, stock-based
compensation and incentive-unit compensation expense. We believe
Adjusted Net Income from Continuing Operations is useful to
investors because it provides readers with a more meaningful
measure of our profitability before recording certain items for
which the timing or amount cannot be reasonably determined.
However, this measure is provided in addition to, not as an
alternative for, and should be read in conjunction with, the
information contained in our financial statements prepared in
accordance with GAAP. The following table provides a reconciliation
of net income (loss) from continuing operations as determined in
accordance with GAAP to adjusted net income from continuing
operations for the periods indicated:
|
|
|
|
For the Three Months |
|
|
|
|
Ended June 30, |
|
(Amounts in
$000s) |
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
Net income
(loss) from continuing operations |
$ |
(195,833 |
) |
|
$ |
(26,614 |
) |
|
|
|
|
|
|
|
|
Add
(Deduct): |
|
|
|
|
|
|
Loss on
commodity derivatives instruments |
|
90,617 |
|
|
|
30,463 |
|
|
|
Cash
settlements received (paid) on expired commodity derivatives |
|
69,911 |
|
|
|
37,539 |
|
|
|
and other financial
instruments |
|
|
|
|
Loss on
sale of properties |
|
- |
|
|
|
50 |
|
|
|
Stock-based
compensation (LTIPs) |
|
10,521 |
|
|
|
1,957 |
|
|
|
Incentive-based compensation expenses |
|
74,329 |
|
|
|
16,116 |
|
|
Adjusted
net income from continuing operations before tax effect |
|
49,545 |
|
|
|
59,511 |
|
|
|
Tax effect
related to adjustments |
|
(28,218 |
) |
|
|
(42,201 |
) |
|
|
|
|
|
|
|
|
Adjusted Net Income from Continuing
Operations |
$ |
21,327 |
|
|
$ |
17,310 |
|
|
|
Memorial Resource Development Corp.
Commodity Hedge Positions
At June 30, 2016, MRD had the following open commodity positions
(excluding embedded derivatives):
|
Remaining |
|
|
|
|
|
|
2016 |
|
|
2017 |
|
Natural Gas
Derivative Contracts: |
|
|
|
|
|
|
|
Fixed price swap
contracts: |
|
|
|
|
|
|
|
Average
Monthly Volume (MMBtu) |
|
3,120,000 |
|
|
|
1,770,000 |
|
Weighted-average fixed price |
$ |
4.06 |
|
|
$ |
4.24 |
|
|
|
|
|
|
|
|
|
Collar contracts: |
|
|
|
|
|
|
|
Average
Monthly Volume (MMBtu) |
|
1,000,000 |
|
|
|
1,050,000 |
|
Weighted-average floor price |
$ |
4.00 |
|
|
$ |
4.00 |
|
Weighted-average ceiling price |
$ |
4.71 |
|
|
$ |
5.06 |
|
|
|
|
|
|
|
|
|
Purchased put option
contracts: |
|
|
|
|
|
|
|
Average
Monthly Volume (MMBtu) |
|
6,700,000 |
|
|
|
5,350,000 |
|
Weighted-average strike price |
$ |
3.54 |
|
|
$ |
3.48 |
|
Weighted-average deferred premium |
$ |
(0.34 |
) |
|
$ |
(0.32 |
) |
|
|
|
|
|
|
|
|
TGT Z1 basis swaps: |
|
|
|
|
|
|
|
Average
Monthly Volume (MMBtu) |
|
1,120,000 |
|
|
|
200,000 |
|
Spread -
Henry Hub |
$ |
(0.10 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
Crude Oil
Derivative Contracts: |
|
|
|
|
|
|
|
Fixed price swap
contracts: |
|
|
|
|
|
|
|
Average
Monthly Volume (Bbls) |
|
32,833 |
|
|
|
28,000 |
|
Weighted-average fixed price |
$ |
83.91 |
|
|
$ |
84.70 |
|
|
|
|
|
|
|
|
|
Collar contracts: |
|
|
|
|
|
|
|
Average
Monthly Volume (Bbls) |
|
26,600 |
|
|
|
— |
|
Weighted-average floor price |
$ |
80.00 |
|
|
$ |
— |
|
Weighted-average ceiling price |
$ |
99.70 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
NGL Derivative
Contracts: |
|
|
|
|
|
|
|
Fixed price swap
contracts: |
|
|
|
|
|
|
|
Average
Monthly Volume (Bbls) |
|
366,758 |
|
|
|
— |
|
Weighted-average fixed price |
$ |
39.93 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
At June 30, 2016, MRD had the following open
embedded derivative positions:
|
Remaining |
|
|
2016 |
|
Oil Hybrid
Contracts: |
|
|
|
Fixed price swap
contracts: |
|
|
|
Average
Monthly Volume (Bbls) |
|
27,211 |
|
Weighted-average fixed price |
$ |
46.50 |
|
Initial net
investment price |
|
62.29 |
|
Total
contract swap price |
$ |
108.79 |
|
|
|
|
|
NGL Hybrid
Contracts: |
|
|
|
Fixed price swap
contracts: |
|
|
|
Average
Monthly Volume (Bbls) |
|
111,175 |
|
Weighted-average fixed price |
$ |
15.77 |
|
Initial net
investment price |
|
25.61 |
|
Total
contract swap price |
$ |
41.38 |
|
|
|
|
|
Contact:
Memorial Resource Development Corp.
Hays Mabry – Senior Manager, Investor Relations
(713) 588-8339
ir@memorialrd.com
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