Yuma Energy, Inc. Provides an Update to its Liquidity and Operations, and Reports Second Quarter 2018 Financial Results

Yuma Energy, Inc. Provides an Update to its Liquidity and Operations, and Reports Second Quarter 2018 Financial Results
Yuma Energy, Inc. Provides an Update to its Liquidity and Operations, and Reports Second Quarter 2018 Financial Results

HOUSTON, Aug. 9, 2018 /PRNewswire/ -- Yuma Energy, Inc. (NYSE American: YUMA) (the "Company" or "Yuma") today provided information related to its liquidity and operations. The Company also reported its financial results for the quarter ended June 30, 2018.

Liquidity

As previously reported, the Company initiated several strategic alternatives to remedy its limited liquidity (defined as cash on hand and undrawn borrowing base), its financial covenant compliance issues, and to provide it with additional working capital to develop its existing assets.  During the second quarter, the Company entered into an Asset Purchase and Sale Agreement on May 21, 2018 regarding its Kern County, California properties, including the sale of all of the Company's oil and gas properties, fee properties, land, buildings, other property and equipment in consideration of $4.7 million in gross proceeds and the buyer's assumption of certain plugging and abandonment liabilities.  The transaction is scheduled to close by August 31, 2018.  Upon the closing of the transaction, it is anticipated that the majority of the proceeds will be applied to the repayment of borrowings under the Company's credit facility.  In addition, the Company has reduced its personnel by eight employees since December 31, 2017, a 24% decrease, including five positions that were eliminated on June 30, 2018.  This brings the Company's headcount to 26 employees as of June 30, 2018.  It should also be noted that, during the second quarter of 2018, the Company took additional steps to further reduce its general and administrative costs by reducing subscriptions, consultants and other non-essential services, as well as eliminating certain of its capital expenditures planned for 2018.

Additionally, the Company plans to take further steps to remedy its limited liquidity which may include, but are not limited to, further reducing or eliminating capital expenditures; entering into additional commodity derivatives for a portion of the Company's anticipated production; further reducing general and administrative expenses; selling certain non-core assets; seeking merger and acquisition related opportunities; and potentially raising proceeds from capital markets transactions, including the sale of debt or equity securities.  There can be no assurance that the exploration of strategic alternatives will result in a transaction or otherwise remedy the Company's limited liquidity.

The Company has borrowings under its credit facility which require, among other things, compliance with certain financial ratios and covenants.  Due to operating losses the Company sustained during recent quarters, at June 30, 2018 the Company was not in compliance under the credit facility with its (i) total debt to EBITDAX covenant for the trailing four quarter period, (ii) current ratio covenant, (iii) EBITDAX to interest expense covenant for the trailing four quarter period, and (iv) the liquidity covenant requiring the Company to maintain unrestricted cash and borrowing base availability of at least $4.0 million.  In addition, due to this non-compliance, the Company classified its entire bank debt as a current liability in its financial statements as of June 30, 2018.  On July 31, 2018, the Borrowers entered into the Waiver and Third Amendment to Credit Agreement (the "Third Amendment") with the Lender.  Pursuant to the Third Amendment, effective as of June 30, 2018, the Borrowers were granted a waiver for non-compliance from the liquidity covenant to have cash and cash equivalent investments together with borrowing base availability under the Credit Agreement of at least $4.0 million.  In addition, as part of the Third Amendment, the Lenders requested that the Borrowers provide weekly cash flow forecasts and a monthly accounts payable report to the Lenders.   The Third Amendment also provides for a redetermination of the borrowing base on August 15, 2018.

As of June 30, 2018, the Company had outstanding borrowings of $35.0 million under its credit facility, and its total borrowing base was $35.0 million, leaving no undrawn borrowing base.  Due to drilling activities and other factors, the Company had a working capital deficit of $40.93 million (inclusive of the Company's outstanding debt under its credit facility) and a loss from operations of $2.90 million for the six months ended June 30, 2018. 

These breaches of the terms and conditions of the Credit Agreement could result in acceleration of the Company's indebtedness, in which case the debt would become immediately due and payable thereby giving its lenders various rights and remedies, including foreclosure. 

The significant risks and uncertainties described above raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.

Operations Update

In 2017, the Company entered the Permian Basin through a joint venture with two privately held energy companies and established an Area of Mutual Interest ("AMI") covering approximately 33,280 acres in Yoakum County, Texas, located in the Northwest Shelf of the Permian Basin. The primary target within the AMI is the San Andres formation, which has been one of the largest producing formations in Texas to date. As of June 30, 2018, the Company held a 62.5% working interest in approximately 4,823 gross acres (3,014 net acres) within the AMI.  In November 2017, the Company drilled a salt water disposal well, the Jameson SWD #1. In December 2017, the Company spudded the State 320 #1H horizontal San Andres well, which was subsequently completed in February 2018.  The Company opened the well on March 1, 2018 and placed the well on production. As of July 17, 2018, the well has produced a total of 1,708 barrels of oil, 12,748 Mcf of gas, and 421,603 barrels of water.  The well is currently shut-in pending evaluation of the commerciality and future development of the prospect area.  Given the well performance to date, the ability to establish commercial production in the prospect area is uncertain at this time. 

Second Quarter 2018 Financial Results

Production

The following table presents the net quantities of oil, natural gas and natural gas liquids produced and sold by the Company for the three and six months ended June 30, 2018 and 2017, and the average sales price per unit sold.


Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Production volumes:








Crude oil and condensate (Bbls)

47,322


66,242


94,479


142,640

Natural gas (Mcf)

538,241


786,111


1,171,681


1,685,538

Natural gas liquids (Bbls)

28,974


35,092


54,217


68,566

   Total (Boe) (1)

166,003


232,353


343,976


492,129

Average prices realized:








   Crude oil and condensate (per Bbl)

$67.69


$47.14


$66.36


$48.65

   Natural gas (per Mcf)

$3.30


$3.29


$3.04


$3.05

   Natural gas liquids (per Bbl)

$29.11


$24.05


$30.09


$23.61



(1)

Barrels of oil equivalent have been calculated on the basis of six thousand cubic feet (Mcf) of natural gas equal to one barrel of oil equivalent (Boe).

Revenues

The following table presents the Company's revenues for the three and six months ended June 30, 2018 and 2017.


Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Sales of natural gas and crude oil:








Crude oil and condensate

$ 3,203,260


$ 3,122,848


$   6,269,517


$   6,938,780

Natural gas

1,775,919


2,587,968


3,567,170


5,141,410

Natural gas liquids

843,398


843,888


1,631,426


1,618,938

   Total revenues

$ 5,822,577


$ 6,554,704


$ 11,468,113


$ 13,699,128

Expenses

The Company's lease operating expenses ("LOE") and LOE per Boe for the three and six months ended June 30, 2018 and 2017, are set forth below:


Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017

Lease operating expenses

$1,890,809


$1,844,896


$3,556,129


$3,542,804

Severance, ad valorem taxes and marketing

905,016


1,214,228


1,865,464


2,177,584

     Total LOE

$2,795,825


$3,059,124


$5,421,593


$5,720,388









LOE per Boe

$16.84


$13.17


$15.76


$11.62

LOE per Boe without severance, ad valorem taxes and marketing

$11.39


$7.94


$10.34


$7.20

Commodity Derivative Instruments

Commodity derivative instruments open as of June 30, 2018 are provided below.  Natural gas prices are NYMEX Henry Hub prices, and crude oil prices are NYMEX West Texas Intermediate.



2018


2019


2020



Settlement


Settlement


Settlement

NATURAL GAS (MMBtu):







Swaps







Volume


887,533


1,660,297


1,095,430

Price 


$2.97


$2.75


$2.68








CRUDE OIL (Bbls):







Swaps







Volume


89,995


156,320



Price 


$53.17


$53.77



About Yuma Energy, Inc.

Yuma Energy, Inc., a Delaware corporation, is an independent Houston-based exploration and production company focused on acquiring, developing and exploring for conventional and unconventional oil and natural gas resources.  Historically, the Company's operations have focused on onshore properties located in central and southern Louisiana and southeastern Texas where it has a long history of drilling, developing and producing both oil and natural gas assets.  In addition, during 2017 the Company began acquiring acreage in Yoakum County, Texas, with plans to explore and develop oil and natural gas assets in the Permian Basin.  Finally, the Company has operated positions in Kern County, California, and non-operated positions in the East Texas Woodbine and the Bakken Shale in North Dakota.  Its common stock is listed on the NYSE American under the trading symbol "YUMA."

Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects," "believes," "intends," "anticipates," "plans," "estimates," "potential," "possible," or "probable" or statements that certain actions, events or results "may," "will," "should," or "could" be taken, occur or be achieved. The forward-looking statements include statements about future operations, and estimates of reserve and production volumes. Forward-looking statements are based on current expectations and assumptions and analyses made by the Company in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances. However, whether actual results and developments will conform with expectations is subject to a number of risks and uncertainties, including but not limited to: our limited liquidity and the Company's ability to repay outstanding loans when due; the Company's ability to continue as a going concern; reduction in the borrowing base of the Company's credit facility; the risks of the oil and natural gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas); risks and uncertainties involving geology of oil and natural gas deposits; the uncertainty of reserve estimates; revisions to reserve estimates as a result of changes in commodity prices; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather; declines in oil and natural gas prices; inability of management to execute its plans to meet its goals, shortages of drilling equipment, oil field personnel and services, unavailability of gathering systems, pipelines and processing facilities and the possibility that government policies may change.  The Company's annual report on Form 10-K for the year ended December 31, 2017, quarterly reports on Form 10-Q, recent current reports on Form 8-K, and other SEC filings discuss some of the important risk factors identified that may affect its business, results of operations, and financial condition. The Company undertakes no obligation to revise or update publicly any forward-looking statements, except as required by law.

Yuma Energy, Inc.


CONSOLIDATED BALANCE SHEETS

(Unaudited)






June 30,


December 31,


2018


2017





ASSETS 








CURRENT ASSETS:




Cash and cash equivalents 

$    2,348,627


$       137,363

Accounts receivable, net of allowance for doubtful accounts:




Trade

3,522,107


4,496,316

Officer and employees

7,781


53,979

Other

441,795


1,004,479

Prepayments

622,843


976,462

Other deferred charges

387,108


347,490





Total current assets

7,330,261


7,016,089





OIL AND GAS PROPERTIES (full cost method):




Proved properties

504,060,185


494,216,531

Unproved properties - not subject to amortization

534,627


6,794,372






504,594,812


501,010,903

Less:  accumulated depreciation, depletion and amortization

(425,547,424)


(421,165,400)





Net oil and gas properties

79,047,388


79,845,503





OTHER PROPERTY AND EQUIPMENT:




Assets held for sale

2,309,243


-

Land, buildings and improvements

-


1,600,000

Other property and equipment

1,793,397


2,845,459


4,102,640


4,445,459

Less: accumulated depreciation and amortization

(1,324,152)


(1,409,535)





Net other property and equipment

2,778,488


3,035,924





OTHER ASSETS AND DEFERRED CHARGES:




Deposits

467,592


467,592

Other noncurrent assets

79,997


270,842





Total other assets and deferred charges

547,589


738,434





TOTAL ASSETS 

$  89,703,726


$  90,635,950

 

Yuma Energy, Inc.


CONSOLIDATED BALANCE SHEETS – CONTINUED

(Unaudited)



June 30,


December 31,


2018


2017





LIABILITIES AND EQUITY








CURRENT LIABILITIES:




Current maturities of debt

$ 35,094,226


$       651,124

Accounts payable, principally trade

8,904,037


11,931,218

Commodity derivative instruments

2,613,690


903,003

Asset retirement obligations

88,722


277,355

Other accrued liabilities

1,555,117


2,295,438





Total current liabilities

48,255,792


16,058,138





LONG-TERM DEBT

-


27,700,000





OTHER NONCURRENT LIABILITIES:




Asset retirement obligations

10,492,311


10,189,058

Commodity derivative instruments

783,338


336,406

Deferred rent

272,506


290,566

Employee stock awards

143,961


191,110





Total other noncurrent liabilities

11,692,116


11,007,140





COMMITMENTS AND CONTINGENCIES (Notes 2 and 15)








EQUITY




Series D convertible preferred stock




($0.001 par value, 7,000,000 authorized, 1,971,072 issued and outstanding as of June 30, 2018, and 1,904,391 issued and outstanding as of December 31, 2017)

1,971


1,904

Common stock




($0.001 par value, 100 million shares authorized, 23,242,969 outstanding as of June 30, 2018 and 22,661,758 outstanding as of December 31, 2017)

23,243


22,662

Additional paid-in capital

57,304,534


55,064,685

Treasury stock at cost (380,069 shares as of June 30, 2018 and 13,343 shares as of December 31, 2017)

(438,890)


(25,278)

Accumulated earnings (deficit)

(27,135,040)


(19,193,301)





Total equity

29,755,818


35,870,672





TOTAL LIABILITIES AND EQUITY

$ 89,703,726


$  90,635,950

 

Yuma Energy, Inc.


CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017









REVENUES:








Sales of natural gas and crude oil

$  5,822,577


$ 6,554,704


$ 11,468,113


$ 13,699,128









EXPENSES:








Lease operating and production costs

2,795,825


3,059,124


5,421,593


5,720,388

General and administrative – stock-based compensation

64,230


385,097


360,524


436,832

General and administrative – other

1,587,628


1,906,629


3,336,866


4,082,631

Depreciation, depletion and amortization

2,245,170


2,763,444


4,462,491


5,904,384

Asset retirement obligation accretion expense

140,161


141,454


283,101


280,023

Impairment of long lived assets

176,968


-


176,968


-

Bad debt expense

261,659


73,513


327,467


73,513

Total expenses

7,271,641


8,329,261


14,369,010


16,497,771









LOSS FROM OPERATIONS

(1,449,064)


(1,774,557)


(2,900,897)


(2,798,643)









OTHER INCOME (EXPENSE):








Net gains (losses) from commodity derivatives

(2,095,570)


2,138,080


(3,346,830)


5,694,863

Interest expense

(567,635)


(482,285)


(1,033,927)


(978,376)

Gain (loss) on other property and equipment

-


(70,874)


-


484,768

Other, net

81,884


5,659


78,348


42,067

Total other income (expense)

(2,581,321)


1,590,580


(4,302,409)


5,243,322









INCOME (LOSS) BEFORE INCOME TAXES

(4,030,385)


(183,977)


(7,203,306)


2,444,679









Income tax expense (benefit)

-


(20,581)


-


5,950









NET INCOME (LOSS)

(4,030,385)


(163,396)


(7,203,306)


2,438,729









PREFERRED STOCK:








Dividends paid in kind

374,416


349,300


738,433


688,910









NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ (4,404,801)


$  (512,696)


$ (7,941,739)


$   1,749,819









INCOME (LOSS) PER COMMON SHARE:








Basic

($0.19)


($0.04)


($0.35)


$0.14

Diluted

($0.19)


($0.04)


($0.35)


$0.14









WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:








Basic

23,082,334


12,235,286


22,948,475


12,223,337

Diluted

23,082,334


12,235,286


22,948,475


12,407,996

 

Yuma Energy, Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Six Months Ended June 30,


2018


2017

CASH FLOWS FROM OPERATING ACTIVITIES:




Reconciliation of net income (loss) to net cash provided by (used in) operating activities:




Net income (loss)

$ (7,203,306)


$ 2,438,729

Depreciation, depletion and amortization of property and equipment

4,462,491


5,904,384

Impairment of long lived assets

176,968


-

Amortization of debt issuance costs

260,803


172,826

Deferred rent liability, net

25,668


-

Stock-based compensation expense

360,524


436,832

Settlement of asset retirement obligations

(575,817)


(227,346)

Asset retirement obligation accretion expense

283,101


280,023

Bad debt expense

327,467


73,513

Net (gains) losses from commodity derivatives

3,346,830


(5,694,863)

Gain on sales of fixed assets

-


(556,141)

Loss on write-off of abandoned facilities

-


71,373

(Gain) loss on write-off of liabilities net of assets

(103,045)


(34,835)

Changes in assets and liabilities:




(Increase) decrease in accounts receivable

1,339,227


426,945

Decrease in prepaids, deposits and other assets

297,321


521,167

(Decrease) increase in accounts payable and other current and non-current liabilities

65,487


(923,200)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

3,063,719


2,889,407





CASH FLOWS FROM INVESTING ACTIVITIES:




Capital expenditures for oil and gas properties

(6,928,684)


(4,526,587)

Proceeds from sale of oil and gas properties

1,000,000


5,400,563

Proceeds from sale of other fixed assets

-


641,556

Derivative settlements

(1,189,211)


550,675

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

(7,117,895)


2,066,207





CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from borrowings on senior credit facility

14,300,000


-

Repayment of borrowings on senior credit facility

(7,000,000)


(7,500,000)

Repayments of borrowings - insurance financing

(556,898)


(512,783)

Debt issuance costs

-


(2,152)

Shelf registration costs

(64,050)


-

Treasury stock repurchases

(413,612)


(23,270)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

6,265,440


(8,038,205)





CHANGE IN CASH AND CASH EQUIVALENTS

2,211,264


(3,082,591)





CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

137,363


3,625,686





CASH AND CASH EQUIVALENTS AT END OF PERIOD

$  2,348,627


$    543,095





Supplemental disclosure of cash flow information:




Interest payments (net of interest capitalized)

$     773,150


$    811,042

Interest capitalized

$     133,772


$    112,136

Supplemental disclosure of significant non-cash activity:




(Increase) decrease in capital expenditures financed by accounts payable

$  3,252,112


$  (386,337)

 

View original content:http://www.prnewswire.com/news-releases/yuma-energy-inc-provides-an-update-to-its-liquidity-and-operations-and-reports-second-quarter-2018-financial-results-300695123.html

SOURCE Yuma Energy, Inc.

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