|HighPoint Resources Reports Second Quarter 2018 Financial and Operating Results|
For the second quarter of 2018, the Company reported a net loss of
Chief Executive Officer and President
"Operationally, our development program is on track as Hereford activity began as planned in April. Drilling of the first DSU was recently completed and we initiated production from nine DUCs. Three of the DUCs were placed on flowback in May and we are seeing positive early production data as the wells are performing consistent with our base type-curve assumptions. The early results highlight the significant resource potential of the Hereford asset. The pace of development at Hereford will increase during the second half of the year as we are currently operating two drilling rigs. NE Wattenberg also continues to see very consistent results and produced an average of 23,900 Boe/d in the second quarter of 2018, representing a 65% increase over the second quarter of 2017.
"Midstream constraints in NE Wattenberg resulted in curtailed natural gas and liquids production during the second quarter. While we had anticipated these issues, the impact was greater than forecast due to a period of unseasonably warm weather in June and July, which resulted in an increase in processing facility outages. We are adjusting our 2018 natural gas and NGL guidance to account for these temporary issues, but expect that full-year oil volumes will be relatively unchanged from previous expectations.
"I am pleased with HighPoint's ability to create long-term shareholder value through development of our extensive and favorable asset base targeting the oil-weighted and rural core of the
OPERATING AND FINANCIAL RESULTS
The following table summarizes certain operating and financial results for the second quarter of 2018 and 2017 and for the first quarter of 2018:
The Company reported oil, natural gas and natural gas liquids ("NGL") production of 2.41 MMBoe for the second quarter of 2018, which was an increase of 58% over the second quarter of 2017. Oil volumes totaled 1.51 MMBbls, which was an increase of 67% over the second quarter of 2017. Production sales volumes from NE Wattenberg totaled 2.2 MMBoe and Hereford volumes totaled 0.2 MMBoe. Second quarter natural gas and NGL production was impacted by midstream constraints in NE Wattenberg, including high line pressures, unplanned processing facility outages due to unseasonably warm weather and lower product recoveries associated with interim processing facilities.
Production sales volumes were comprised of approximately 63% oil, 21% natural gas and 16% NGLs.
For the second quarter of 2018, WTI oil prices averaged
For the second quarter of 2018, the Company had derivative commodity swaps in place for 11,637 barrels of oil per day tied to WTI pricing at
Production tax expense averaged
Depreciation, depletion and amortization ("DD&A") averaged
Debt and Liquidity
The Company currently has
Capital expenditures for the second quarter of 2018 totaled
Capital expenditures included
The Company is operating three drilling rigs in the
The Company produced an average of 23,900 Boe/d (61% oil) in the second quarter of 2018, representing a 65% increase over the second quarter of 2017. For the second quarter of 2018, the Company drilled 20 XRL wells and placed 21 XRL wells on initial flowback. The Company is currently operating a one-rig drilling program and expects to maintain this level of development activity for the remainder of the year.
Recent activity was highlighted by DSU 5-61-27, which includes 10 XRL wells and is located in the east-central portion of NE Wattenberg. Initial flowback began in the second quarter and the wells have performed consistent with the type-curve expectations. This is a step-out to DSU 5-61-20, which was placed on flowback in the fourth quarter of 2017 and continues to perform in line with the base type-curve after 260 days of production.
In addition, DSUs 4-62-28 and 4-62-33 are located in the southern portion of NE Wattenberg and were also placed on initial flowback during the second quarter. The DSUs include 10 XRL and 9 XRL wells, respectively, and continue to trend towards peak production.
The Company continues to mitigate the impact of inflationary pressure on well costs as wells drilled during the first half of 2018 averaged approximately
Production sales volumes for the second quarter of 2018 averaged approximately 2,550 Boe/d (79% oil). Drilling operations commenced in April on DSU 11-63-14, which includes 10 XRL wells (6 Niobrara, 4 Codell). Drilling was completed in June and it is anticipated that the wells will be placed on initial flowback during the third quarter of 2018. A full-time completion crew began operating in April and completion operations commenced on three pads (three wells each) of DUCs, which incorporated optimized completions, including controlled flowback methods. The first three wells were placed on flowback in May and continue to trend towards peak production. Early production data is encouraging as the wells are performing consistent with the base type-curve of 550 MBoe for the 60 days of production following initial oil sales. It is anticipated that peak production will be achieved after approximately 90 days of production. The remaining six DUCs were placed on production in June and July and are in the initial flowback stage.
The Company expects to maintain two drilling rigs for the remainder of the year and the focus of the 2018 program will be on full DSU development to maximize drilling and completion efficiencies. The Company has already begun to realize significant savings due to synergies generated as completion costs for the 9 DUCs were 29% below legacy completion costs. In addition, drilling costs for the initial DSU were 17% below legacy wells with drilling days to rig release averaging approximately 8.5 days per well, including a best-in-class well that was drilled in 6.9 days.
The Company experienced midstream curtailments in the first half of 2018 due to high line pressures in the
Hereford natural gas volumes are processed by Summit midstream, which is in the process of expanding its gas processing capacity to 60 MMcf/d by the end of 2018.
The Company continues to maintain no oil marketing or oil pipeline delivery commitments and expects that oil price differentials to benchmark pricing will be less than
2018 OPERATING GUIDANCE
The Company is updating its 2018 operating guidance and providing third quarter of 2018 guidance for capital expenditures and production as discussed below. The Company is reiterating its previously announced outlook for 2019.
See "Forward-Looking Statements" below.
COMMODITY HEDGES UPDATE
The following table summarizes our current hedge position as of
Realized sales prices will reflect basis differentials from the index prices to the sales location.
Second Quarter Conference Call and Webcast
The Company plans to host a conference call on Thursday, August 9, 2018, to discuss second quarter of 2018 results. The call is scheduled at
Members of the Company's management are currently scheduled to participate in the following investor events:
Presentation materials will be posted to the investor relations section of the Company's website prior to the start of each event.
All statements in this press release, other than statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as expects, forecast, guidance, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements herein; however, these are not the exclusive means of identifying forward-looking statements. In particular, the Company is providing "2018 Operating Guidance," which contains projections for certain 2018 full-year and third quarter operational and financial metrics. Additional forward-looking statements in this release relate to, among other things, future capital expenditures, costs, projects and opportunities; and the availability of adequate natural gas processing capacity, future line pressures and the timing and effect of new midstream facilities, and future diversification of gas processing capacity.
These and other forward-looking statements in this press release are based on management's judgment as of the date of this release and are subject to numerous risks and uncertainties. Actual results may vary significantly from those indicated in the forward-looking statements. Please refer to the
ABOUT HIGHPOINT RESOURCES CORPORATION
Discretionary cash flow, adjusted net income (loss) and EBITDAX are non-GAAP measures. These measures are presented because management believes that they provide useful additional information to investors for analysis of the Company's performance. If used as a liquidity measure, they should be reconciled to cash flow from operations as well as adjusting net income (loss) for certain items to allow for a more consistent comparison from period to period. In addition, the Company believes that these measures are widely used by professional research analysts and others in the valuation, comparison and investment recommendations of companies in the oil and gas exploration and production industry, and that many investors use the published research of industry research analysts in making investment decisions.
These measures should not be considered in isolation or as a substitute for net income, income from operations, net cash provided by operating activities or other income, profitability, cash flow or liquidity measures prepared in accordance with GAAP. The definition of these measures may vary among companies, and, therefore, the amounts presented may not be comparable to similarly titled measures of other companies.
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Larry C. Busnardo, Vice President, Investor Relations, 303-312-8514
Vice President, Investor Relations