Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 03, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | Sanchez Energy Corp | |
Entity Central Index Key | 1,528,837 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 87,797,690 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 437,689 | $ 184,434 |
Oil and natural gas receivables | 88,207 | 101,396 |
Joint interest billings receivables | 15,793 | 22,569 |
Accounts receivable - related entities | 6,192 | 4,491 |
Fair value of derivative instruments | 3,241 | 16,430 |
Other current assets | 10,877 | 21,478 |
Total current assets | 561,999 | 350,798 |
Oil and natural gas properties | ||
Proved oil and natural gas properties | 3,418,554 | 3,130,407 |
Unproved oil and natural gas properties | 434,244 | 398,605 |
Total oil and natural gas properties | 3,852,798 | 3,529,012 |
Less: Accumulated depreciation, depletion, amortization and impairment | (1,618,850) | (1,501,553) |
Total oil and natural gas properties, net | 2,233,948 | 2,027,459 |
Other assets: | ||
Fair value of derivative instruments | 8,836 | 1,428 |
Investments (Investment in SNMP measured at fair value of $26.8 million and $25.2 as of June 30, 2018 and December 31, 2017, respectively) | 46,758 | 38,462 |
Other assets | 52,873 | 52,488 |
Total assets | 2,904,414 | 2,470,635 |
Current liabilities: | ||
Accounts payable | 15,446 | 14,994 |
Other payables | 100,451 | 81,970 |
Accrued liabilities: | ||
Capital expenditures | 93,506 | 85,340 |
Other | 96,036 | 84,794 |
Fair value of derivative instruments | 102,904 | 56,190 |
Short term debt | 23,996 | 23,996 |
Other current liabilities | 71,107 | 115,244 |
Total current liabilities | 503,446 | 462,528 |
Long term debt, net of premium, discount and debt issuance costs | 2,364,749 | 1,930,683 |
Asset retirement obligations | 38,499 | 36,098 |
Fair value of derivative instruments | 31,132 | 17,474 |
Other liabilities | 34,332 | 65,480 |
Total liabilities | 2,972,158 | 2,512,263 |
Commitments and contingencies (Note 17) | ||
Mezzanine equity: | ||
Preferred units ($1,000 liquidation preference, 500,000 units authorized, issued and outstanding as of March 31, 2018 and December 31, 2017) | 452,131 | 427,512 |
Stockholders' equity: | ||
Preferred stock ($0.01 par value, 15,000,000 shares authorized; 1,838,985 shares issued and outstanding as of March 31, 2018 and December 31, 2017 of 4.875% Convertible Perpetual Preferred Stock, Series A; 3,527,830 shares issued and outstanding as of March 31, 2018 and December 31, 2017 of 6.500% Convertible Perpetual Preferred Stock, Series B) | 53 | 53 |
Common stock ($0.01 par value, 300,000,000 shares authorized; 87,797,689 and 83,984,827 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively) | 884 | 845 |
Additional paid-in capital | 1,370,908 | 1,362,118 |
Accumulated deficit | (1,891,720) | (1,832,156) |
Total stockholders' deficit | (519,875) | (469,140) |
Total liabilities and stockholders' deficit | $ 2,904,414 | $ 2,470,635 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Investment in SNMP measured at fair value | $ 26,800 | $ 25,200 |
Liquidation preference | $ 1,000 | $ 1,000 |
Preferred units, shares authorized | 500,000 | 500,000 |
Preferred units, shares issued | 500,000 | 500,000 |
Preferred units, shares outstanding | 500,000 | 500,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 15,000,000 | 15,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 87,797,689 | 83,984,827 |
Common stock, shares outstanding | 87,797,689 | 83,984,827 |
Preferred Class A | ||
Preferred stock, shares issued | 1,838,985 | 1,838,985 |
Preferred stock, shares outstanding | 1,838,985 | 1,838,985 |
Dividend rate (as a percent) | 4.875% | 4.875% |
Preferred Class B | ||
Preferred stock, shares issued | 3,527,830 | 3,527,830 |
Preferred stock, shares outstanding | 3,527,830 | 3,527,830 |
Dividend rate (as a percent) | 6.50% | 6.50% |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
REVENUES: | ||||
Sales and marketing revenues | $ 5,096 | $ 9,897 | ||
Total revenues | 259,314 | $ 175,704 | 510,540 | $ 309,546 |
OPERATING COSTS AND EXPENSES: | ||||
Oil and natural gas production expenses | 77,644 | 62,620 | 149,592 | 100,620 |
Exploration expenses | 516 | 4,446 | 549 | 4,797 |
Sales and marketing expenses | 5,086 | 9,259 | ||
Production and ad valorem taxes | 14,208 | 8,799 | 27,677 | 15,323 |
Depreciation, depletion, amortization and accretion | 62,323 | 40,842 | 121,571 | 67,245 |
Impairment of oil and natural gas properties | 194 | 1,142 | 1,845 | |
General and administrative expense | 29,467 | 29,713 | 51,887 | 97,178 |
Total operating costs and expenses | 189,438 | 146,420 | 361,677 | 287,008 |
Operating income | 69,876 | 29,284 | 148,863 | 22,538 |
Other income (expense): | ||||
Interest income | 1,528 | 150 | 2,270 | 507 |
Other income (expense) | 6,715 | (6,618) | 10,143 | 3,917 |
Gain on sale of oil and natural gas properties | 1,528 | 6,022 | 1,528 | 10,366 |
Interest expense | (44,590) | (35,961) | (88,510) | (68,986) |
Earnings from equity investments | 242 | 677 | ||
Net gains (losses) on commodity derivatives | (70,044) | 59,614 | (114,098) | 98,496 |
Total other income (expense) | (104,863) | 23,449 | (188,667) | 44,977 |
income (loss) before income taxes | (34,987) | 52,733 | (39,804) | 67,515 |
Income tax benefit | 255 | 1,208 | ||
Net income (loss) | (34,987) | 52,988 | (39,804) | 68,723 |
Less: | ||||
Preferred stock dividends | (3,987) | (3,987) | (7,974) | (7,974) |
Preferred unit dividends and distributions | (12,500) | (10,950) | (22,408) | (27,415) |
Preferred unit amortization | (6,189) | (5,282) | (12,119) | (6,992) |
Net income allocable to participating securities | (2,378) | (1,974) | ||
Net income (loss) attributable to common stockholders | $ (57,663) | $ 30,391 | $ (82,305) | $ 24,368 |
Net income (loss) per common share - basic (in dollars per share) | $ (0.71) | $ 0.40 | $ (1.01) | $ 0.33 |
Weighted average number of shares used to calculate net income (loss) attributable to common stockholders - basic (in shares) | 81,787 | 76,395 | 81,356 | 73,045 |
Net income (loss) per common share - diluted (in dollars per share) | $ (0.71) | $ 0.39 | $ (1.01) | $ 0.33 |
Weighted average number of shares used to calculate net income (loss) attributable to common stockholders - diluted ( in shares) | 81,787 | 89,015 | 81,356 | 73,145 |
Oil | ||||
REVENUES: | ||||
Revenue from contract with customer | $ 156,544 | $ 91,096 | $ 311,935 | $ 164,372 |
Natural gas liquid | ||||
REVENUES: | ||||
Revenue from contract with customer | 56,533 | 36,873 | 105,838 | 63,973 |
Natural gas | ||||
REVENUES: | ||||
Revenue from contract with customer | $ 41,141 | $ 47,735 | $ 82,870 | $ 81,201 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Stockholders' Equity - 6 months ended Jun. 30, 2018 - USD ($) shares in Thousands, $ in Thousands | Preferred Class A | Preferred Class B | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2017 | $ 18 | $ 35 | $ 845 | $ 1,362,118 | $ (1,832,156) | $ (469,140) |
Balance (in shares) at Dec. 31, 2017 | 1,839 | 3,528 | 83,985 | |||
Increase (Decrease) in Stockholders' Equity (Deficit) | ||||||
Adoption of accounting standards | 22,739 | 22,739 | ||||
Issuance of common stock | $ 1 | 567 | 568 | |||
Issuance of common stock (in shares) | 100 | |||||
Dividends on Series A and Series B Preferred stock | $ 8 | 3,977 | (7,972) | (3,987) | ||
Dividends on Series A and Series B Preferred stock (in shares) | 805 | |||||
Dividends on SN UnSub preferred units | (25,000) | (25,000) | ||||
Distributions - SN UnSub preferred units | 2,592 | 2,592 | ||||
Accretion of discount on SN UnSub preferred units | (12,119) | (12,119) | ||||
Restricted stock awards, net of forfeitures | $ 30 | (30) | ||||
Restricted stock awards, net of forfeitures (in shares) | 2,908 | |||||
Non-cash stock-based compensation | 4,276 | 4,276 | ||||
Net loss | (39,804) | (39,804) | ||||
Balance at Jun. 30, 2018 | $ 18 | $ 35 | $ 884 | $ 1,370,908 | $ (1,891,720) | $ (519,875) |
Balance (in shares) at Jun. 30, 2018 | 1,839 | 3,528 | 87,798 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ (39,804) | $ 68,723 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation, depletion, amortization and accretion | 121,571 | 67,245 |
Impairment of oil and natural gas properties | 1,142 | 1,845 |
Gain on sale of oil and natural gas properties | (1,528) | (10,366) |
Stock-based compensation expense | 8,395 | 30,391 |
Net (gains) losses on commodity derivative contracts | 114,098 | (98,496) |
Net cash settlement received (paid) on commodity derivative contracts | (39,306) | 4,069 |
(Gain) loss on other derivatives | 4,526 | (249) |
Gain on investments | (8,296) | (806) |
Amortization of deferred gain on Western Catarina Midstream Divestiture | (11,860) | (11,860) |
Amortization of debt issuance costs | 9,832 | 6,205 |
Accretion of debt discount, net | 697 | 316 |
Deferred taxes | (1,208) | |
Gain on inventory market adjustment | (9) | |
Loss from equity investments | 847 | |
Distributions from equity investments | (677) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 15,314 | (50,521) |
Accounts receivable - related entities | (1,701) | 710 |
Other payables | 11,832 | 816 |
Accrued liabilities | 16,531 | 6,992 |
Other current liabilities | (51,203) | 42,656 |
Other assets and liabilities, net | 5,054 | 3,138 |
Net cash provided by operating activities | 155,294 | 59,761 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Payments for oil and natural gas properties | (307,665) | (212,883) |
Payments for other property and equipment | (1,237) | (15,130) |
Proceeds from sale of oil and natural gas properties | 1,425 | 60,802 |
Acquisition of oil and natural gas properties | 2,834 | (1,039,127) |
Proceeds from sale of inventory | 158 | |
Payments for investments | (74) | |
Payments for purchases of inventory | (2,473) | |
Sale of investments | 12,500 | |
Net cash used in investing activities | (306,958) | (1,193,912) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from borrowings | 539,865 | 258,500 |
Repayment of borrowings | (103,174) | (60,000) |
Issuance of common stock | 135,942 | |
Issuance of preferred units | 500,000 | |
Issuance costs related to preferred units | (20,894) | |
Financing costs | (13,208) | (24,633) |
Preferred dividends paid | (7,974) | |
Cash paid to tax authority for employee stock-based compensation awards | (682) | (1,019) |
Preferred unit distribution | (9,908) | (27,415) |
Net cash provided by financing activities | 404,919 | 760,481 |
Increase (decrease) in cash and cash equivalents | 253,255 | (373,670) |
Cash and cash equivalents, beginning of period | 184,434 | 501,917 |
Cash and cash equivalents, end of period | 437,689 | 128,247 |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Change in asset retirement obligations | 860 | 5,521 |
Change in accrued capital expenditures | 8,166 | 61,735 |
SUPPLEMENTAL DISCLOSURE: | ||
Cash paid for interest | $ 63,658 | $ 61,786 |
Organization
Organization | 6 Months Ended |
Jun. 30, 2018 | |
Organization | |
Organization | Note 1. Organization and Business Sanchez Energy Corporation (together with our consolidated subsidiaries, “Sanchez Energy,” the “Company,” “SN,” “we,” “our,” “us” or similar terms), a Delaware corporation formed in August 2011, is an independent exploration and production company focused on the acquisition and development of U.S. onshore unconventional oil and natural gas resources, with a current focus on the horizontal development of significant resource potential from the Eagle Ford Shale in South Texas. We also hold an undeveloped acreage position in the Tuscaloosa Marine Shale (“TMS”) in Mississippi and Louisiana, which offers potential future development opportunities. As of June 30, 2018, we have assembled approximately 485,000 gross leasehold acres (283,000 net acres) in the Eagle Ford Shale. In addition, we continually evaluate opportunities to grow our acreage and our producing assets through acquisitions. Our successful acquisition of such assets will depend on the opportunities and the financing alternatives available to us at the time we consider such opportunities. We have included definitions of some of the oil and natural gas terms used in this Quarterly Report on Form 10-Q in the “Glossary of Selected Oil and Natural Gas Terms.” |
Basis of Presentation and Summa
Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Basis of Presentation and Summary of Significant Accounting Policies | |
Basis of Presentation and Summary of Significant Accounting Policies | Note 2. Basis of Presentation and Summary of Significant Accounting Policies The accompanying condensed consolidated financial statements are unaudited and were prepared from the Company’s records. The condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The Company derived the condensed consolidated balance sheet as of December 31, 2017 from the audited financial statements filed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017 (the “2017 Annual Report”). Because this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in connection with the consolidated financial statements and notes thereto included in the 2017 Annual Report, which contains a summary of the Company’s significant accounting policies and other disclosures. In the opinion of management, these financial statements include the adjustments and accruals, all of which are of a normal recurring nature, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results to be expected for the entire year. As of June 30, 2018, the Company’s significant accounting policies are consistent with those discussed in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies,” in the notes to the Company’s consolidated financial statements contained in the 2017 Annual Report. Principles of Consolidation The Company’s condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. Use of Estimates The accompanying condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates pertain to proved oil and natural gas reserves and related cash flow estimates used in the depletion and impairment of proved oil and natural gas properties, the evaluation of unproved properties for impairment, the fair value of commodity derivative contracts, embedded derivatives and asset retirement obligations, accrued oil and natural gas revenues, capital expenditures and expenses and the allocation of general and administrative (“G&A”) expenses. Actual results could differ materially from those estimates. Recent Accounting Pronouncements In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07 “Compensation - Stock Compensation (ASC 718) - Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of ASC 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. We are currently in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements. In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (ASC 815): Targeted Improvements to Accounting for Hedging Activities,” which changes the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness, and presenting all items that affect earnings in the same income statement line item as the hedged item. The ASU also provides new alternatives for applying hedge accounting. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01 “Business Combinations (ASC 805): Clarifying the Definition of a Business,” which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is now effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018, using a prospective method; the clarified definition of a business will be applied by the Company to transactions executed subsequent to the effective date. In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (ASC 230): Restricted Cash,” which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. This ASU is now effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The adoption of ASU 2016-18 did not have an impact on the Company’s unaudited condensed consolidated statement of cash flows. In October 2016, the FASB issued ASU 2016-16 “Income Taxes (ASC 740): Intra-Entity Transfers of Assets Other Than Inventory,” which eliminates a current exception in U.S. GAAP to the recognition of the income tax effects of temporary differences that result from intra-entity transfers of non-inventory assets. The intra-entity exception is being eliminated under the ASU. The standard is required to be applied on a modified retrospective basis and is now effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The adoption of ASU 2016-16 did not have an impact on the Company’s unaudited condensed consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (ASC 230): Classification of Certain Cash Receipts and Cash Payments”. This ASU is intended to clarify the presentation of cash receipts and payments in specific situations. The amendments in this ASU are now effective for financial statements issued for annual periods beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018, using a retrospective method. The adoption of ASU 2016-15 did not have an impact on the Company’s unaudited condensed consolidated statement of cash flows. In February 2016, the FASB issued ASU 2016-02 “Leases (ASC 842),” effective for annual and interim periods for public companies beginning after December 15, 2018, with a modified retrospective approach to be used for implementation. The standards update the previous lease guidance by requiring the recognition of a right-to-use asset and lease liability on the statement of financial position for all leases with lease terms of more than 12 months. The lease liability represents the discounted obligation to make future minimum lease payments and corresponding right-of-use asset on the balance sheet for most leases. Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. The Company has several operating leases as further discussed in Note 17, “Commitments and Contingencies,” which will be impacted by the new rules under this standard. The Company will not early adopt this standard, and will apply the revised lease rules for our interim and annual reporting periods starting January 1, 2019. The Company is currently evaluating the impact of these rules on its financial statements and has started the assessment process by evaluating the population of leases under the revised definition. The Company is also in the process of implementing a lease accounting software to properly account for lease data upon adoption. The adoption of this standard will result in an increase in the assets and liabilities on the Company’s condensed consolidated balance sheets. The quantitative impacts of the new standard are dependent on the active leases at the time of adoption. As a result, the evaluation of the effect of the new standards will extend over future periods. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (ASC 606).” In March, April, May and December of 2016, the FASB issued rules clarifying several aspects of the new revenue recognition standard. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2017. This guidance outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods and services. The new standard also requires more detailed disclosures related to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. See Note 18, “Revenue Recognition” for discussion of the Company’s adoption of the new standard. |
Change in Accounting Principle
Change in Accounting Principle | 6 Months Ended |
Jun. 30, 2018 | |
Change in Accounting Principle | |
Change in Accounting Principle | Note 3. Change in Accounting Principle During the fourth quarter of 2017, the Company voluntarily changed its method of accounting for oil and natural gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods has been recast to reflect retrospective application of the successful efforts method. In general, under successful efforts, exploration expenditures such as exploratory dry holes, exploratory geological and geophysical costs, delay rentals, unproved impairments, and exploration overhead are charged against earnings as incurred, versus being capitalized under the full cost method of accounting. The successful efforts method also provides for the assessment of potential property impairments under FASB Accounting Standards Codification (ASC) 360 “Property, Plant and Equipment” by comparing the net carrying value of oil and natural gas properties with associated projected undiscounted pre-tax future net cash flows. If the expected undiscounted pre-tax future net cash flows are lower than the unamortized capitalized costs, the capitalized cost is reduced to fair value. Under the full cost method of accounting, a write-down would be required if the net carrying value of oil and natural gas properties exceeds a full cost “ceiling,” using an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months. In addition, gains or losses, if applicable, are generally recognized on the dispositions of oil and natural gas property and equipment under the successful efforts method, as opposed to an adjustment to the net carrying value of the remaining assets under the full cost method unless the sale or disposition does not cause a significant change in the relationship between costs and the estimated quantities of proved reserves. Our consolidated financial statements have been recast to reflect these differences for all periods presented, including the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Stockholders’ Deficit, Condensed Consolidated Statements of Cash Flows and related information in Notes 3, 4, 6, 12, 13, 14, 16 and 19. The following table presents the effects of the change to the successful efforts method in the condensed consolidated balance sheet as of June 30, 2017 (in thousands): Changes to Condensed Consolidated Balance Sheet June 30, 2017 Under Full Cost Changes As Reported Under Successful Efforts Oil and natural gas properties: Proved oil and natural gas properties $ 4,186,528 $ (1,360,068) $ 2,826,460 Unproved oil and natural gas properties 477,863 (8,497) 469,366 Total oil and natural gas properties 4,664,391 (1,368,565) 3,295,826 Less: Accumulated depreciation, depletion, amortization and impairment (2,818,705) 1,423,768 (1,394,937) Total oil and natural gas properties, net 1,845,686 55,203 1,900,889 Other assets 41,604 (1,014) 40,590 Total assets $ 2,218,053 $ 54,189 $ 2,272,242 Current liabilities: Other current liabilities $ 79,362 $ 8,907 $ 88,269 Total current liabilities 272,861 8,907 281,768 Other liabilities 56,387 20,412 76,799 Total liabilities 2,256,191 29,319 2,285,510 Accumulated deficit (1,795,631) 24,870 (1,770,761) Total stockholders' deficit (447,323) 24,870 (422,453) Total liabilities and stockholders' deficit $ 2,218,053 $ 54,189 $ 2,272,242 The following table presents the effects of the change to the successful efforts method in the condensed consolidated statement of operations for the three and six months ended June 30, 2017 (in thousands, except per share amounts): Changes to the Condensed Consolidated Statement of Operations For the three months ended June 30, 2017 Under Full Cost Changes As Reported Under Successful Efforts Oil and natural gas production expenses $ 64,848 $ (2,228) $ 62,620 Exploration expenses — 4,446 4,446 Depreciation, depletion, amortization and accretion 50,851 (10,009) 40,842 Impairment of oil and natural gas properties — — — Gain on sale of oil and natural gas properties 7,133 (1,111) 6,022 Net income 46,309 6,679 52,988 Net income allocable to participating securities (1,893) (485) (2,378) Net income attributable to common stockholders $ 24,198 $ 6,193 $ 30,391 Net income per common share - basic $ 0.32 $ 0.08 $ 0.40 Net income per common share - diluted $ 0.31 $ 0.08 $ 0.39 Changes to the Condensed Consolidated Statement of Operations For the six months ended June 30, 2017 Under Full Cost Changes As Reported Under Successful Efforts Oil and natural gas production expenses $ 105,073 $ (4,453) $ 100,620 Exploration expenses — 4,797 4,797 Depreciation, depletion, amortization and accretion 84,057 (16,812) 67,245 Impairment of oil and natural gas properties — 1,845 1,845 Gain on sale of oil and natural gas properties 12,276 (1,910) 10,366 Net income 56,010 12,713 68,723 Net income allocable to participating securities (1,021) (953) (1,974) Net income attributable to common stockholders $ 12,608 $ 11,760 $ 24,368 Net income per common share - basic $ 0.17 $ 0.16 $ 0.33 Net income per common share - diluted $ 0.17 $ 0.16 $ 0.33 The following table presents the effects of the change to the successful efforts method in the condensed consolidated statement of cash flows for the six months ended June 30, 2017 (in thousands): Changes to the Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2017 Under Full Cost Change As Reported Under Successful Efforts Net income $ 56,010 $ 12,713 $ 68,723 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 84,057 (16,812) 67,245 Impairment of oil and natural gas properties — 1,845 1,845 Gain on sale of oil and natural gas properties (12,276) 1,910 (10,366) Amortization of deferred gain on Catarina Midstream Sale (7,407) (4,453) (11,860) Net cash provided by operating activities 64,558 (4,797) 59,761 Payments for oil and natural gas properties (217,680) 4,797 (212,883) Net cash used in investing activities (1,198,709) 4,797 (1,193,912) Net cash provided by financing activities 760,481 — 760,481 Decrease in cash and cash equivalents (373,670) — (373,670) Cash and cash equivalents, beginning of period 501,917 — 501,917 Cash and cash equivalents, end of period $ 128,247 $ — $ 128,247 |
Acquisitions and Divestitures
Acquisitions and Divestitures | 6 Months Ended |
Jun. 30, 2018 | |
Acquisitions and Divestitures | |
Acquisitions and Divestitures | Note 4. Acquisitions and Divestitures Our acquisitions are accounted for under the acquisition method of accounting in accordance with ASC 805, “Business Combinations”. A business combination may result in the recognition of a gain or goodwill based on the measurement of the fair value of the assets acquired at the acquisition date as compared to the fair value of consideration transferred, adjusted for purchase price adjustments. The initial accounting for acquisitions may not be complete and adjustments to provisional amounts, or recognition of additional assets acquired or liabilities assumed, may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the acquisition dates. The results of operations of the properties acquired in our acquisitions have been included in the condensed consolidated financial statements since the closing dates of the acquisitions. Typically, the sale or disposition of oil and natural gas properties results in a gain or loss being recorded as the difference between the proceeds received and the net capitalized costs of the oil and natural gas properties, unless the sale or disposition does not cause a significant change in the relationship between costs and the estimated quantities of proved reserves. In circumstances where treating a sale like a normal retirement does not result in a significant change in the relationship between costs and the estimated quantities of proved reserves, the proceeds are applied to reduce net capitalized costs. Javelina Disposition On September 19, 2017, the Company, through its wholly owned subsidiary, SN Cotulla Assets, LLC (“SN Cotulla”), sold approximately 68,000 undeveloped net acres located in the Eagle Ford Shale in LaSalle and Webb Counties, Texas to Vitruvian Exploration IV, LLC for approximately $105 million in cash, after preliminary closing adjustments (the “Javelina Disposition”). Consideration received from the Javelina Disposition was based on an August 1, 2017 effective date. The Company recorded a gain of approximately $73.7 million on the Javelina Disposition. Marquis Disposition On June 15, 2017, the Company, through its wholly owned subsidiary, SN Marquis LLC, sold approximately 21,000 net acres primarily located in the Eagle Ford Shale in Fayette and Lavaca Counties, Texas to Lonestar Resources US, Inc. (“Lonestar”) for an adjusted purchase price of approximately $44 million in cash and approximately $6.0 million in Lonestar’s Series B Convertible Preferred Stock, valued as of the closing date, which subsequently converted into 1.5 million shares of Lonestar’s Class A Common Stock (the “Marquis Disposition”). The consideration received from the Marquis Disposition was based on a January 1, 2017 effective date. Assets conveyed pursuant to the Marquis Disposition consisted of net proved reserves of approximately 2.7 MMBoe (100% developed) and net production of approximately 1,750 Boe per day from 104 gross (65 net) wells. The Company did not record any gains or losses as a result of the Marquis Disposition. Comanche Acquisition On March 1, 2017, the Company, through two of its subsidiaries, SN EF UnSub, LP (“SN UnSub”) and SN EF Maverick, LLC (“SN Maverick”), along with Gavilan Resources, LLC (“Gavilan”), an entity controlled by Blackstone, completed the acquisition of approximately 318,000 gross (155,000 net) acres comprised of 252,000 gross (122,000 net) Eagle Ford Shale acres and 66,000 gross (33,000 net) acres of deep rights only, which includes the Pearsall Shale, representing an approximate 49% average working interest therein (the “Comanche Assets”) from Anadarko E&P Onshore LLC and Kerr-McGee Oil and Gas Onshore LP (together, “Anadarko”) for approximately $2.1 billion in cash (the “Comanche Acquisition”). Pursuant to the purchase and sale agreement entered into in connection with the Comanche Acquisition, (i) SN UnSub paid approximately 37% of the purchase price (including a $100 million cash contribution from other Company entities) and (ii) SN Maverick paid approximately 13% of the purchase price. In the aggregate, SN UnSub and SN Maverick acquired half of the 49% working interest in the Comanche Assets (approximately 50% and 0%, respectively, of the estimated total proved developed producing reserves (PDPs), 20% and 30%, respectively, of the estimated total proved developed non-producing reserves (PDNPs), and 20% and 30%, respectively, of the total proved undeveloped reserves (PUDs)) (“SN Comanche Assets”). Pursuant to the purchase and sale agreement, Gavilan paid 50% of the purchase price and acquired the remaining half of the 49% working interest in the Comanche Assets (and approximately 50% of the estimated total PDPs, PDNPs and PUDs). The Comanche Assets are primarily located in the Western Eagle Ford and are contiguous with our existing acreage, significantly expanding our asset base and production. The effective date of the Comanche Acquisition was July 1, 2016. The total purchase price was allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition as follows (in thousands): Proved oil and natural gas properties $ 781,789 Unproved properties 263,471 Other assets acquired 6,702 Fair value of assets acquired 1,051,962 Asset retirement obligations (8,289) Fair value of net assets acquired $ 1,043,673 Cotulla Disposition On December 14, 2016, SN Cotulla Assets, LLC (“SN Cotulla”), a wholly-owned subsidiary of the Company, completed the initial closing of the sale of certain oil and natural gas interests and associated assets located in Dimmit, Frio, LaSalle, Zavala and McMullen Counties, Texas (the “Cotulla Assets”) to Carrizo (Eagle Ford) LLC (“Carrizo Eagle Ford”) pursuant to a purchase and sale agreement dated October 24, 2016 by and among SN Cotulla, the Company for the limited purposes set forth therein, Carrizo Eagle Ford and Carrizo Oil and Gas for the limited purposes set forth therein, for an adjusted purchase price of approximately $153.5 million, subject to normal and customary post-closing adjustments (the “Cotulla Disposition”). The assets sold included estimated net proved reserves as of the effective date of June 1, 2016 of approximately 6.9 MMBoe. Proved developed reserves were estimated to account for approximately 90% of the total net proved reserves. As of the effective date, the Cotulla Assets consisted of approximately 15,000 net acres with 112 gross (93 net) wells producing approximately 3,000 Boe/d. During 2017, two additional closings occurred and final settlement adjustments were made resulting in total aggregate consideration of approximately $167.4 million. The Company determined that adjustments to capitalized costs for the Cotulla Disposition would cause a significant change in the relationship between costs and the estimated quantities of proved reserves. Upon the initial closing of the Cotulla Disposition, the Company recorded a gain of approximately $85.3 million. As a result of subsequent closings of the Cotulla Disposition, the Company recorded additional gains of $4.3 million and $6.0 million during the three months ended March 31, 2017 and June 30, 2017, respectively. |
Cash and Cash Equivalents
Cash and Cash Equivalents | 6 Months Ended |
Jun. 30, 2018 | |
Cash and Cash Equivalents | |
Cash and Cash Equivalents | Note 5. Cash and Cash Equivalents As of June 30, 2018 and December 31, 2017, cash and cash equivalents consisted of the following (in thousands): June 30, December 31, 2018 2017 Cash $ 80,046 $ 135,363 Cash equivalents 357,643 49,071 Total cash and cash equivalents $ 437,689 $ 184,434 |
Oil and Natural Gas Properties
Oil and Natural Gas Properties | 6 Months Ended |
Jun. 30, 2018 | |
Oil and Natural Gas Properties | |
Oil and Natural Gas Properties | Note 6. Oil and Natural Gas Properties The Company’s oil and natural gas properties are accounted for using the successful efforts method of accounting. All direct costs and certain indirect costs associated with the acquisition, successful exploration and development of oil and natural gas properties are capitalized. Once evaluated, these costs, as well as the estimated costs to retire the assets, are included in the amortization base and amortized to depletion expense using the units‑of‑production method. Depletion is calculated based on estimated proved oil and natural gas reserves. The sale or disposition of oil and natural gas properties results in a gain or loss unless the sale or disposition does not cause a significant change in the relationship between costs and the estimated quantities of proved reserves in which case the proceeds are applied to reduce net capitalized costs. Depreciation, depletion and amortization —Depreciation, depletion and amortization (“DD&A”) is provided using the units‑of‑production method based upon estimates of proved reserves of oil, natural gas and NGLs and conversion of production of the same to a common unit of measure based upon the relative energy content of each hydrocarbon. The Company groups its oil and natural gas properties with a common geological structure or stratigraphic condition (“common operating field”) in accordance with ASC 932 “Extractive Activities – Oil and Gas” for purposes of computing DD&A, assessing proved property impairments and accounting for asset dispositions. All capitalized costs of oil and natural gas properties are amortized using the units‑of‑production method based on proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from the amortization base are transferred to proved oil and natural gas properties and amortization begins. All other non-oil and natural gas assets are stated at historical cost, net of impairments, and are depreciated using the straight-line method over their respective useful lives. In arriving at depletion rates under the units‑of‑production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by internal and third-party geologists and engineers, which require significant judgment as does the projection of future production volumes and levels of future costs. In addition, considerable judgment is necessary in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expense. Impairment of Oil and Natural Gas Properties —Capitalized costs (net of accumulated DD&A and impairment) of proved oil and natural gas properties are subjected to an impairment test when facts and circumstances indicate that their carrying value may not be recoverable. We compare net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using management’s expectations of future oil and natural gas prices. These future price scenarios reflect our estimation of future price volatility. If net capitalized costs exceed estimated undiscounted future net cash flows, the measurement of impairment is based on estimated fair value, using estimated discounted future net cash flows. Significant inputs used to determine the fair values of proved properties include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. The underlying commodity prices embedded in the estimated cash flows are the product of a process that begins with NYMEX forward curve pricing, adjusted for estimated location and quality differentials, as well as other factors that management believes will impact realizable prices of our oil and natural gas properties. We did not record a proved property impairment during the three and six month periods ended June 30, 2018 and 2017. Changes in production rates, levels of reserves, future development costs, and other factors will impact our actual impairment analyses in future periods. Unproved Properties —Costs associated with unproved properties and properties under development are excluded from the amortization base until the properties have been evaluated. Additionally, the costs associated with leasehold acreage and wells currently drilling are also initially excluded from the amortization base. Unproved properties are identified on a project basis, with a project being an area in which significant leasehold interests are acquired within a contiguous area. Unproved properties are reviewed periodically by management and transferred into the amortization base when management determines that a project area has been evaluated through drilling operations or thorough geologic evaluation. If the results of an assessment indicate that the properties are impaired, the carrying amount of the identified unproved properties are reduced to their fair value. We recorded $0.2 million and $1.1 million of impairment to our unproved oil and natural gas properties for the three and six months ended June 30, 2018, respectively, and we recorded no impairment and $1.8 million of impairment to our unproved oil and natural gas properties for the three and six months ended June 30, 2017, respectively. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2018 | |
Debt | |
Debt | Note 7. Debt Debt as of June 30, 2018 consisted of (i) $167.5 million under the SN UnSub Credit Agreement (as defined below), which is non-recourse to SN and the other obligors under the 6.125% Notes (defined below), 7.75% Notes (defined below), 7.25% Senior Secured Notes (defined below) and the Credit Agreement (defined below) (“Non-Recourse to the Company”), as well as to the obligors under the SR Credit Agreement (defined below) and the Non-Recourse Subsidiary Term Loan (defined below), (ii) $600 million principal amount of 7.75% Notes maturing on June 15, 2021, (iii) approximately $4 million related to a 4.59% non-recourse subsidiary term loan due 2022 (the “Non-Recourse Subsidiary Term Loan”), which is Non-Recourse to the Company and to the obligors under the SN UnSub Credit Agreement and the SR Credit Agreement, (iv) $1.15 billion principal amount of 6.125% Notes maturing on January 15, 2023, (v) $500 million principal amount of 7.25% Senior Secured Notes maturing on February 15, 2023, subject to satisfaction of certain conditions, and (vi) approximately $24.0 million under the SR Credit Agreement, which is Non-Recourse to the Company and to the obligors under the SN UnSub Credit Agreement and the Non-Recourse Subsidiary Term Loan. As of June 30, 2018 and December 31, 2017, the Company’s outstanding debt consisted of the following (in thousands): June 30, December 31, Interest Rate Original Maturity Date 2018 2017 Short-Term Debt SR Credit Agreement (1)(2) Variable August 8, 2018 $ 23,996 $ 23,996 Total short-term debt $ 23,996 $ 23,996 Long-Term Debt Credit Agreement Variable February 14, 2023 $ — $ 50,000 SN UnSub Credit Agreement (1) Variable March 1, 2022 167,500 175,500 7.75% Notes 7.75% June 15, 2021 600,000 600,000 4.59% Non-Recourse Subsidiary Term Loan (1) 4.59% August 31, 2022 3,990 4,164 6.125% Notes 6.125% January 15, 2023 1,150,000 1,150,000 7.25% Senior Secured Notes 7.25% February 15, 2023 500,000 — 2,421,490 1,979,664 Unamortized discount on Additional 7.75% Notes (2,674) (3,126) Unamortized premium on Additional 6.125% Notes 1,225 1,360 Unamortized discount on 7.25% Senior Secured Notes (4,755) — Unamortized debt issuance costs (50,537) (47,215) Total long-term debt $ 2,364,749 $ 1,930,683 (1) These debt instruments are Non-Recourse to the Company. (2) Bears a weighted-average interest rate of 6.522% and 5.122% for the six months ended June 30, 2018 and one month ended December 31, 2017, respectively. The components of interest expense are as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Interest on SR Credit Agreement $ (480) $ — $ (828) $ — Interest and commitment fees on Credit Agreement (30) (562) (695) (940) Interest on SN UnSub Credit Agreement (2,202) (2,299) (4,503) (3,055) Interest on Senior Notes (38,297) (29,234) (71,861) (58,470) Interest on Non-Recourse Subsidiary Term Loan (47) — (94) — Amortization of debt issuance costs (3,118) (3,708) (9,832) (6,205) Amortization of discounts and premium on Senior Notes (416) (158) (697) (316) Total interest expense $ (44,590) $ (35,961) $ (88,510) $ (68,986) Credit Facilities Third Amended and Restated Credit Agreement On February 14, 2018, the Company, as borrower, and its existing restricted subsidiaries, as loan parties (the “Loan Parties”), entered into a revolving credit facility represented by a Third Amended and Restated Credit Agreement dated as of February 14, 2018 with Royal Bank of Canada, providing for a $25 million first-out senior secured working capital and letter of credit facility (the “Credit Agreement”), which amended and restated the Company’s previous credit facility in its entirety. Although pari passu in right of payment with the 7.25% Senior Secured Notes, the obligations under our amended and restated credit facility and specified hedging and cash management obligations have, pursuant to the terms of a collateral trust agreement, “first-out” status as to proceeds of the shared collateral and thus the 7.25% Senior Secured Notes are, to the extent of the value of the collateral, effectively junior to the obligations under our amended and restated credit facility and such specified hedging and cash management obligations. Availability under the Credit Agreement is at all times subject to customary conditions but, except in limited circumstances, not to satisfaction of any collateral coverage ratio or other maintenance covenants. The Credit Agreement will mature on the earlier of (i) February 14, 2023 or (ii) the 91st day prior to the scheduled maturity of any “material indebtedness,” which is defined to include, without limitation, any indebtedness arising in connection with the Company’s 7.75% Notes, 6.125% Notes or the 7.25% Senior Secured Notes. The 7.75% Notes are scheduled to mature on June 15, 2021. The Company’s obligations under the Credit Agreement are guaranteed by all of the Company’s restricted subsidiaries that guarantee the 7.25% Senior Secured Notes and, pursuant to the CTA (as defined below), are secured by priority liens on a first-out collateral proceeds payment priority basis in the Shared Collateral (as defined below), subject only to permitted collateral liens. At the Company’s election, interest on borrowings under the Credit Agreement may be calculated based on an ABR or an adjusted Eurodollar (LIBOR) rate, plus an applicable margin. The applicable margin is either 1.50% or 2.25% for ABR borrowings and either 2.50% or 3.25% for Eurodollar (LIBOR) borrowings and letters of credit, if any, depending on the Company’s utilization of the availability under the Credit Agreement. The Company is also required to pay a commitment fee of 0.50% per annum on any unused commitment amount. Interest on ABR borrowings and the commitment fee are generally payable quarterly. Interest on Eurodollar borrowings are generally payable at the end of the applicable interest period. The Credit Agreement contains various affirmative and negative covenants and events of default that limit the Company’s ability to, among other things, incur indebtedness, make restricted payments, grant liens and consolidate or merge. The Credit Agreement also provides for cross default between the Credit Agreement and the other material indebtedness of the Company and its restricted subsidiaries, in an aggregate principal amount in excess of $40 million. As of June 30, 2018, the Company was in compliance with the covenants of the Credit Agreement. From time to time, the agents, arrangers, book runners and lenders under the Credit Agreement and their affiliates have provided, and may provide in the future, investment banking, commercial lending, hedging and financial advisory services to the Company and its affiliates in the ordinary course of business, for which they have received, or may in the future receive, customary fees and commissions for these transactions. SN UnSub Credit Agreement On March 1, 2017, SN UnSub, as borrower, entered into a credit agreement for a $500 million revolving credit facility with JP Morgan Chase Bank, N.A. as the administrative agent and the lenders party thereto with a maturity date of March 1, 2022 (the “SN UnSub Credit Agreement”). The initial borrowing base amount under the SN UnSub Credit Agreement was $330 million. Additionally, the SN UnSub Credit Agreement provides for the issuance of letters of credit, generally limited in the aggregate to the lesser of $50 million and the total availability under the borrowing base. Availability under the SN UnSub Credit Agreement is at all times subject to customary conditions and the then applicable borrowing base, which is subject to periodic redetermination. As of June 30, 2018, there were approximately $167.5 million of borrowings and no letters of credit outstanding under the SN UnSub Credit Agreement. Semi-annual redeterminations of the borrowing base are generally scheduled to occur in April and October of each year. On May 11, 2018, the SN UnSub Credit Agreement was amended in conjunction with the Spring 2018 redetermination to, among other things, (i) increase the borrowing base from $330 million to $380 million, (ii) reduce the applicable margins on borrowings outstanding, (iii) reduce the proven reserves minimum collateral requirement, (iv) reduce the restrictions on SN UnSub’s ability to make certain investments, restricted payments, and debt repayments and (v) provide a more permissive maximum hedging covenant. The next regularly scheduled borrowing base redetermination is expected in the fourth quarter of 2018. In addition, the borrowing base is subject to interim redetermination at the request of SN UnSub or the lenders based on, among other things, the lenders’ evaluation of SN UnSub’s and its subsidiaries’ oil and natural gas reserves. The borrowing base is also subject to reduction by 25% of the amount of certain junior debt issuances other than the first $200 million of such debt and by reductions as a result of hedge terminations and asset dispositions that exceed 5% of the then-effective borrowing base, in addition to other customary adjustments. The obligations under the SN UnSub Credit Agreement are guaranteed by all of SN UnSub’s existing and future subsidiaries and secured by a first priority lien on substantially all of SN UnSub’s assets and the assets of SN UnSub’s existing and future subsidiaries, including a first priority lien on all ownership interests in existing and future subsidiaries as well as a pledge of equity interests in SN UnSub held by SN EF UnSub Holdings, LLC (“SN UnSub Holdings”) and SN EF UnSub GP, LLC, the general partner of SN UnSub (the “SN UnSub General Partner”), in each case, subject to customary exceptions; provided, however, that the guarantee and first priority lien requirements do not extend to existing and future subsidiaries of SN UnSub designated as “unrestricted subsidiaries.” As of June 30, 2018, SN UnSub had no subsidiaries. At SN UnSub’s election, borrowings under the SN UnSub Credit Agreement may be made on an ABR or a Eurodollar rate basis, plus an applicable margin. The applicable margin varies from 1.00% to 2.00% for ABR borrowings and from 2.00% to 3.00% for Eurodollar borrowings, depending on the utilization of the borrowing base. In addition, SN UnSub is also required to pay a commitment fee on the amount of any unused commitments at a rate of 0.50% per annum. Interest on ABR borrowings and the commitment fee are generally payable quarterly. Interest on the Eurodollar borrowings are generally payable at the applicable maturity date. The SN UnSub Credit Agreement contains various affirmative and negative covenants and events of default that limit SN UnSub’s ability to, among other things, incur indebtedness, make restricted payments, grant liens, consolidate or merge, dispose of certain assets, make certain investments, engage in transactions with affiliates, enter into and maintain hedge transactions and make certain acquisitions. The SN UnSub Credit Agreement also provides for an event of default upon a change of control and cross default between the SN UnSub Credit Agreement and other indebtedness of SN UnSub in an aggregate principal amount exceeding $25 million. Additionally, the SN UnSub Credit Agreement contains “separateness” covenants that require SN UnSub to comply with certain corporate formalities and transact with affiliates on an arms’ length basis and to indicate in the consolidated financial statements that SN UnSub and SN UnSub General Partner are separate entities apart from their respective security holders and affiliates and the assets and credit of SN UnSub and SN UnSub General Partner are not available to satisfy the debts and other obligations of such security holders and affiliates or any other person or entity. Furthermore, the SN UnSub Credit Agreement contains financial covenants that require SN UnSub to satisfy certain specified financial ratios, including (i) a current assets to current liabilities ratio of at least 1.0 to 1.0 as of the last day of each fiscal quarter and (ii) a net debt to consolidated EBITDAX ratio of not greater than 4.0 to 1.0 for each test period, in each case commencing with the fiscal quarter ending June 30, 2017. As of June 30, 2018, the Company was in compliance with the covenants of the SN UnSub Credit Agreement. From time to time, the agents, arrangers, book runners and lenders under the SN UnSub Credit Agreement and their affiliates have provided, and may provide in the future, investment banking, commercial lending, hedging and financial advisory services to SN UnSub and its affiliates in the ordinary course of business, for which they have received, or may in the future receive, customary fees and commissions for these transactions. SR Credit Agreement As of June 30, 2018, we had approximately $24.0 million in past due borrowings under an existing credit facility of an unrestricted subsidiary acquired as part of the SR Settlement (as defined in Note 12, “Related Party Transactions”) (the “SR Credit Agreement”), which debt is Non-Recourse to the Company and to the obligors under the SN UnSub Credit Agreement and the Non-Recourse Subsidiary Term Loan. Although the original maturity date of the SR Credit Agreement was August 7, 2018, on April 18, 2017, prior to the Company’s acquisition of Sanchez Resources, LLC (“Sanchez Resources”), the administrative agent and the lender thereunder accelerated the obligations due under the SR Credit Agreement as a result of various defaults thereunder. If we do not repay the approximately $24.0 million in borrowings due under the SR Credit Agreement or successfully renegotiate the terms of such facility, then the administrative agent or the lender under that facility could proceed against the collateral securing that debt, consisting of substantially all of Sanchez Resources’ assets (approximately 14,000 net acres largely in the TMS trend). Management is currently in discussions to renegotiate this facility. See Note 12, “Related Party Transactions.” Senior Notes 7.75% Senior Notes Due 2021 On June 13, 2013, we completed a private offering of $400 million in aggregate principal amount of the 7.75% senior notes that will mature on June 15, 2021 (the “Original 7.75% Notes”). Interest on the notes is payable on June 15 and December 15 of each year. We received net proceeds from this offering of approximately $388 million, after deducting initial purchasers’ discounts and offering expenses, which we used to repay our then outstanding indebtedness. The Original 7.75% Notes are senior unsecured obligations and are guaranteed on a joint and several senior unsecured basis by, with certain exceptions, substantially all of our existing and future subsidiaries. On September 18, 2013, we issued an additional $200 million in aggregate principal amount of our 7.75% senior notes due 2021 (the “Additional 7.75% Notes” and, together with the Original 7.75% Notes, the “7.75% Notes”) in a private offering at an issue price of 96.5% of the principal amount of the Additional 7.75% Notes. We received net proceeds of $188.8 million (after deducting the initial purchasers’ discounts and offering expenses of $4.2 million) from the sale of the Additional 7.75% Notes. The Company also received cash for accrued interest from June 13, 2013 through the date of issuance of $4.1 million, for total net proceeds of $192.9 million from the sale of the Additional 7.75% Notes. The Additional 7.75% Notes were issued under the same indenture as the Original 7.75% Notes, and are, therefore, treated as a single class of securities under the indenture. We used the net proceeds from the offering to partially fund our acquisition of contiguous acreage in McMullen County, Texas with 13 gross producing wells completed in October 2013, a portion of the 2013 and 2014 capital budgets and for general corporate purposes. The 7.75% Notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future senior unsecured indebtedness. The 7.75% Notes rank senior in right of payment to our future subordinated indebtedness. The 7.75% Notes are effectively junior in right of payment to all of our existing and future secured debt (including under the Credit Agreement) to the extent of the value of the assets securing such debt. The 7.75% Notes are fully and unconditionally guaranteed (except for customary release provisions) on a joint and several senior unsecured basis by the subsidiary guarantors party to the indenture governing the 7.75% Notes. To the extent set forth in the indenture governing the 7.75% Notes, certain of our subsidiaries will be required to fully and unconditionally guarantee the 7.75% Notes on a joint and several senior unsecured basis in the future. The indenture governing the 7.75% Notes, among other things, restricts our ability and our restricted subsidiaries’ ability to: (i) incur, assume, or guarantee additional indebtedness or issue certain types of equity securities; (ii) pay distributions on, purchase or redeem shares or purchase or redeem subordinated debt; (iii) make certain investments; (iv) enter into certain transactions with affiliates; (v) create or incur liens on their assets; (vi) sell assets; (vii) consolidate, merge or transfer all or substantially all of their assets; (viii) restrict distributions or other payments from the Company’s restricted subsidiaries; and (ix) designate subsidiaries as unrestricted subsidiaries. We have the option to redeem all or a portion of the 7.75% Notes at any time on or after June 15, 2017 at the applicable redemption prices specified in the indenture plus accrued and unpaid interest. In addition, we may be required to repurchase the 7.75% Notes upon a change of control or if we sell certain of our assets. On July 18, 2014, we completed an exchange offer of $600 million aggregate principal amount of the 7.75% Notes that had been registered under the Securities Act of 1933, as amended (the “Securities Act”), for an equal amount of the 7.75% Notes that had not been registered under the Securities Act. 6.125% Senior Notes Due 2023 On June 27, 2014, the Company completed a private offering of $850 million in aggregate principal amount of the 6.125% senior notes due 2023 (the “Original 6.125% Notes”). Interest on the notes is payable on July 15 and January 15 of each year. The Company received net proceeds from this offering of approximately $829 million, after deducting initial purchasers’ discounts and estimated offering expenses, which the Company used to repay all of the $100 million in borrowings outstanding under its previous credit facility and to finance a portion of the purchase price of our acquisition of 106,000 net contiguous acres in Dimmit, LaSalle and Webb Counties, Texas (the “Catarina Acquisition”). We used the remaining proceeds from the offering to fund a portion of the remaining 2014 capital budget and for general corporate purposes. The Original 6.125% Notes are the senior unsecured obligations of the Company and are guaranteed on a joint and several senior unsecured basis by, with certain exceptions, substantially all of the Company’s existing and future subsidiaries. On September 12, 2014, we issued an additional $300 million in aggregate principal amount of our 6.125% senior notes due 2023 (the “Additional 6.125% Notes” and, together with the Original 6.125% Notes, the “6.125% Notes” and, together with the 7.75% Notes and the 7.25% Senior Secured Notes, the “Senior Notes”) in a private offering at an issue price of 100.75% of the principal amount of the Additional 6.125% Notes. We received net proceeds of $295.9 million, after deducting the initial purchasers’ discounts, adding premiums to face value of $2.3 million and deducting estimated offering expenses of $6.4 million. The Company also received cash for accrued interest from June 27, 2014 through the date of the issuance of $3.8 million, for total net proceeds of $299.7 million from the sale of the Additional 6.125% Notes. The Additional 6.125% Notes were issued under the same indenture as the Original 6.125% Notes, and are, therefore, treated as a single class of securities under the indenture. We used a portion of the net proceeds from the offering to fund a portion of the 2014 capital budget and used the remainder of the net proceeds to fund a portion of the 2015 capital budget, and for general corporate purposes. The 6.125% Notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future senior unsecured indebtedness. The 6.125% Notes rank senior in right of payment to the Company’s future subordinated indebtedness. The 6.125% Notes are effectively junior in right of payment to all of the Company’s existing and future secured debt (including under the Credit Agreement) to the extent of the value of the assets securing such debt. The 6.125% Notes are fully and unconditionally guaranteed (except for customary release provisions) on a joint and several senior unsecured basis by the subsidiary guarantors party to the indenture governing the 6.125% Notes. To the extent set forth in the indenture governing the 6.125% Notes, certain of our subsidiaries will be required to fully and unconditionally guarantee the 6.125% Notes on a joint and several senior unsecured basis in the future. The indenture governing the 6.125% Notes, among other things, restricts our ability and our restricted subsidiaries’ ability to: (i) incur, assume or guarantee additional indebtedness or issue certain types of equity securities; (ii) pay distributions on, purchase or redeem shares or purchase or redeem subordinated debt; (iii) make certain investments; (iv) enter into certain transactions with affiliates; (v) create or incur liens on their assets; (vi) sell assets; (vii) consolidate, merge or transfer all or substantially all of their assets; (viii) restrict distributions or other payments from the Company’s restricted subsidiaries; and (ix) designate subsidiaries as unrestricted subsidiaries. The Company has the option to redeem all or a portion of the 6.125% Notes, at any time on or after July 15, 2018 at the applicable redemption prices specified in the indenture plus accrued and unpaid interest. The Company may also redeem the 6.125% Notes, in whole or in part, at a redemption price equal to 100% of their principal amount plus a make whole premium, together with accrued and unpaid interest and additional interest, if any, to the redemption date, at any time prior to July 15, 2018. The Company may also be required to repurchase the 6.125% Notes upon a change of control or if we sell certain Company assets. On February 27, 2015, we completed an exchange offer of $1.15 billion aggregate principal amount of the 6.125% Notes that had been registered under the Securities Act for an equal amount of the 6.125% Notes that had not been registered under the Securities Act. Pursuant to tripartite agreements by and among the Company, U.S. Bank National Association (“U.S. Bank”) and Delaware Trust Company (“Delaware Trust”), effective May 20, 2016, U.S. Bank resigned as the Trustee, Notes Custodian, Registrar and Paying Agent (“Trustee”) under the indentures of the 6.125% Notes and the 7.75% Notes and Delaware Trust was appointed as successor Trustee. No other changes to the indentures for the 6.125% Notes or the 7.75% Notes were made at the time of the change in Trustee. 7.25% Senior Secured First Lien Notes due 2023 On February 14, 2018, the Company closed its private offering to eligible purchasers of $500 million in aggregate principal amount of 7.25% senior secured first lien notes due 2023 (the “7.25% Senior Secured Notes”). The 7.25% Senior Secured Notes were issued pursuant to an indenture, dated as of February 14, 2018 (the “Indenture”), among the Company, the guarantors party thereto, Delaware Trust Company, as trustee, and Royal Bank of Canada, as collateral trustee. The 7.25% Senior Secured Notes are guaranteed on a full, joint and several and senior secured basis by each of the Company’s existing domestic restricted subsidiaries and will be guaranteed by any future domestic restricted subsidiary, in each case, if and so long as such entity guarantees (or is an obligor The 7.25% Senior Secured Notes will mature on February 15, 2023, unless on October 10, 2022 either (i) some or all of the Company’s 6.125% Notes are still outstanding and have not been defeased or (ii) the Company or any of its restricted subsidiaries have any outstanding indebtedness that was used to purchase, repurchase, redeem, defease or otherwise acquire or retire for value the Company’s 6.125% Notes, and such indebtedness under this clause (ii) has a final maturity date that is earlier than May 17, 2023, in which case of either clause (i) or clause (ii), the 7.25% Senior Secured Notes will mature on October 14, 2022. The 7.25% Senior Secured Notes are redeemable, in whole or in part, on or after February 15, 2020 at the redemption prices described in the Indenture, together with accrued and unpaid interest. At any time prior to February 15, 2020, the Company may redeem the 7.25% Senior Secured Notes, in whole or in part, at a redemption price equal to 100% of their principal amount plus a make whole premium, together with accrued and unpaid interest to the redemption date. In addition, the Company may redeem up to 35% of the 7.25% Senior Secured Notes prior to February 15, 2020 in an amount not greater than the net cash proceeds from one or more equity offerings at a redemption price equal to 107.25% of their principal amount, together with accrued and unpaid interest to the redemption date. If the Company sells certain of its assets or experiences specific kinds of changes of control, in certain circumstances it must offer to repurchase the 7.25% Senior Secured Notes. The Indenture restricts the Company’s ability, and the ability of the Company’s restricted subsidiaries, to: (i) incur additional indebtedness or issue preferred stock; (ii) pay dividends or make other distributions; (iii) make other restricted payments and investments; (iv) create liens; (v) incur restrictions on the ability of restricted subsidiaries to pay dividends or make certain other payments; (vi) sell assets, including capital stock of restricted subsidiaries; (vii) merge or consolidate with other entities; and (viii) enter into transactions with affiliates. The 7.25% Senior Secured Notes and the guarantees are secured on a first-priority basis, subject in priority only to permitted collateral liens and to the prior rights of the Credit Agreement and other “first-out” obligations under the CTA, in the following assets of the Company and the subsidiary guarantors (the “Shared Collateral”): (i) substantially all of the Company’s and its restricted subsidiaries’ oil and natural gas properties with proved reserves, (ii) 100% of the equity interest of the Company’s restricted subsidiaries and any of their future direct material restricted subsidiaries; and (iii) substantially all of the Company’s and any guarantor’s other material personal property, but in each case excluding, among other things, deposit accounts, oil and natural gas properties with no proved reserves, equity interests in SN UnSub and other existing and future subsidiaries designated as “unrestricted subsidiaries.” |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments | |
Derivative Instruments | Note 8. Derivative Instruments To reduce the impact of fluctuations in the price of oil, natural gas and NGLs on the Company’s business and results of operations, and to protect the economics of property acquisitions at the time of execution, the Company periodically enters into derivative contracts with respect to a portion of its projected oil and natural gas production through various transactions that fix or modify the future prices to be realized. The derivative contracts may include fixed-for-floating price swaps (whereby, on the settlement date, the Company will receive or pay an amount based on the difference between a pre-determined fixed price and a variable market price for a notional quantity of production), put options (whereby the Company pays a cash premium in order to establish a fixed floor price for a notional quantity of production and, on the settlement date, receives the excess, if any, of the fixed price floor over a variable market price), and costless collars (whereby, on the settlement date, the Company receives the excess, if any, of a variable market price over a fixed floor price up to a fixed ceiling price for a notional quantity of production). In addition, the Company periodically enters into call swaptions as a way to achieve greater downside price protection than offered under prevailing fixed-for-floating price swaps by agreeing to expand the notional quantity hedged or extend the notional quantity settlement period under a fixed-for floating price swap at the counterparty’s election on a designated date. These hedging activities, which are governed by the terms of our Credit Agreement, the SN UnSub Credit Agreement and the terms of SN UnSub’s organizational documents, as applicable, are intended to support oil and natural gas prices at targeted levels and manage exposure to oil and natural gas price fluctuations. It is our policy to enter into derivative contracts only with counterparties that are creditworthy and competitive market participants. Any derivatives that are with (x) lenders, or affiliates of lenders, to the SN UnSub Credit Agreement, or (y) counterparties designated as secured with and under the Credit Agreement are, in each case, collateralized by the assets securing the applicable facility and, therefore, do not currently require the posting of cash collateral. Any derivatives that are with (x) non-lender counterparties, as designated under the SN UnSub Credit Agreement, or (y) counterparties that are not designated as secured under the Credit Agreement are, in each case, unsecured and do not require the posting of cash or other collateral. It is never the Company’s intention to enter into derivative contracts for speculative trading purposes. All of our derivatives are accounted for as mark-to-market activities. Under ASC 815, “Derivatives and Hedging,” these instruments are recorded on the condensed consolidated balance sheets at fair value as either short-term or long-term assets or liabilities based on their anticipated settlement date. The Company nets derivative assets and liabilities by commodity for counterparties where a legal right to such offset exists. Changes in the derivatives’ fair values are recognized in current earnings since the Company has elected not to designate its current derivative contracts as cash flow hedges for accounting purposes. The following table presents derivative positions for the periods indicated as of June 30, 2018: July 1 - December 31, 2018 2019 2020 Oil positions: Fixed-for-floating price swaps (NYMEX WTI): Hedged volume (Bbls) 4,039,794 3,149,000 599,400 Average price ($/Bbl) $ 52.27 $ 51.91 $ 54.31 Call swaptions (NYMEX WTI): Option volume (Bbls) — 730,000 — Average price ($/Bbl) $ — $ 55.00 $ — Natural gas positions: Fixed-for-floating price swaps (NYMEX Henry Hub): Hedged volume (MMbtu) 34,957,648 17,644,000 3,862,500 Average price ($/MMbtu) $ 3.01 $ 2.90 $ 2.74 The following table sets forth a reconciliation of the changes in fair value of the Company’s commodity derivatives for the six months ended June 30, 2018 and the year ended December 31, 2017 (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Beginning fair value of commodity derivatives $ (54,255) $ (35,014) Net losses on crude oil derivatives (108,018) (48,966) Net gains (losses) on natural gas derivatives (6,099) 42,764 Net settlements paid (received) on commodity derivative contracts: Crude oil 51,996 (11,807) Natural gas (5,907) (1,232) Ending fair value of commodity derivatives $ (122,283) $ (54,255) Embedded Derivatives: In 2017, the Company entered into contracts for the purchase of sand and fractionation stimulation services that contain provisions that are required to be bifurcated from the contract and valued as derivatives. The embedded derivatives are valued using a Monte Carlo simulation model which utilizes observable inputs, including the NYMEX WTI oil price and NYMEX Henry Hub natural gas price at various points in time. The Company has marked these derivatives to market as of June 30, 2018 and 2017. The Company incurred an approximate $6.1 million loss and a $0.2 million gain as a result for the six months ended June 30, 2018 and 2017, respectively. Any gains or losses related to embedded derivatives are recorded as a component of other income (expense) in the condensed consolidated statement of operations. Earnout Derivative: As part of the Carnero Gathering Disposition (defined in Note 12, “Related Party Transactions”), we are entitled to receive earnout payments from SNMP based on natural gas delivered above a threshold volume and tariff at the delivery points of the Carnero Gathering pipeline, a pipeline owned by Carnero G&P (as defined in Note 12. “Related Party Transactions.”) These payments were deemed to be a derivative; the resulting earnout derivative was valued through the use of a Monte Carlo simulation model which utilized observable inputs such as the earnout price and volume commitment, as well as unobservable inputs related to the weighted probabilities of various throughput scenarios. As a result, the Company incurred approximate gains of $1.3 million and $1.5 million for the three and six months ended June 30, 2018. Any gains or losses related to the earnout derivative are recorded as a component of other income (expense) in the condensed consolidated statement of operations. The following table sets forth a reconciliation of the changes in fair value of the Company’s embedded and earnout derivatives (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Beginning fair value of other derivatives $ (1,551) $ — Loss on embedded derivatives (6,053) (1,551) Initial fair value of earnout derivative 6,401 — Gain on earnout derivative 1,527 — Ending fair value of other derivatives $ 324 $ (1,551) Balance Sheet Presentation The Company nets derivative assets and liabilities by commodity for counterparties where legal right to such offset exists. Therefore, the Company’s derivatives are presented on a net basis as “Fair value of derivative instruments” on the condensed consolidated balance sheets. The following information summarizes the gross fair values of derivative instruments, presenting the impact of offsetting the derivative assets and liabilities on the Company’s condensed consolidated balance sheets (in thousands): June 30, 2018 Gross Amounts Net Amounts Gross Amount Offset in the Presented in the of Recognized Consolidated Consolidated Assets and Liabilities Balance Sheets Balance Sheets Offsetting Derivative Assets: Current asset $ 3,791 $ (550) $ 3,241 Long-term asset 9,148 (312) 8,836 Total asset $ 12,939 $ (862) $ 12,077 Offsetting Derivative Liabilities: Current liability $ 103,454 $ (550) $ 102,904 Long-term liability 31,444 (312) 31,132 Total liability $ 134,898 $ (862) $ 134,036 December 31, 2017 Gross Amounts Net Amounts Gross Amount Offset in the Presented in the of Recognized Consolidated Consolidated Assets Balance Sheets Balance Sheets Offsetting Derivative Assets: Current asset $ 16,510 $ (80) $ 16,430 Long-term asset 2,100 (672) 1,428 Total asset $ 18,610 $ (752) $ 17,858 Offsetting Derivative Liabilities: Current liability $ 56,270 $ (80) $ 56,190 Long-term liability 18,146 (672) 17,474 Total liability $ 74,416 $ (752) $ 73,664 |
Investments
Investments | 6 Months Ended |
Jun. 30, 2018 | |
Investments | |
Investments | Note 9. Investments On June 15, 2017, the Company received 1,500,000 shares of Lonestar’s Series B Convertible Preferred Stock as part of the consideration for the Marquis Disposition. The Series B Convertible Preferred Stock converted into Lonestar Class A Common Stock on November 3, 2017. As of June 30, 2018, this ownership represents approximately 6.1% of Lonestar’s outstanding shares of common stock. The investment in Lonestar is accounted for by the Company as investments in equity securities measured at fair value in the condensed consolidated balance sheets at the end of each reporting period. The Company recorded a gain related to the investment in Lonestar for the three and six months ended June 30, 2018 of approximately $6.7 million and $6.2 million, respectively. Any gains or losses related to the investment in Lonestar are recorded as a component of other income (expense) in the condensed consolidated statement of operations. On June 14, 2017, SN Catarina, LLC (“SN Catarina”), a wholly owned subsidiary of the Company, completed the sale of its 10% undivided interest in the Silver Oak II Gas Processing Facility in Bee County, Texas (the “SOII Facility”) to a subsidiary of Targa Resources Corp. (“Targa”) with an effective date of June 1, 2017 for $12.5 million of cash (the “SOII Disposition”). Prior to the SOII Disposition, the Company recorded earnings of approximately $677 thousand from its equity interest in the SOII Facility for the six months ended June 30, 2017. On March 1, 2017 (the “Effective Date”), pursuant to the Amended and Restated Limited Liability Company Agreement (the “LLC Agreement”) of Gavilan Resources Holdco, LLC (“GRHL” or “Gavilan Holdco”), GRHL authorized and issued a total of 100 Class A Units to SN Comanche Manager, LLC, a wholly owned unrestricted subsidiary of the Company (“SN Comanche Manager” or “Manager”). GRHL is the parent of Gavilan. SN Comanche Manager, as holder of the Class A Units, does not have voting rights with respect to GRHL except regarding amendments to the LLC Agreement that adversely affect the holders of Class A Units, approval of affiliate transactions, or as required by law. Twenty percent of the Class A Units vest on each of the first five anniversaries of the Effective Date. The Class A Units are entitled to distributions from Available Cash, as defined in and subject to the provisions of the LLC Agreement. The Company accounts for the investment in GRHL as a cost method investment. As of June 30, 2018, the carrying value of the investment in GRHL was $7.3 million, based on the estimated fair value as of March 1, 2017. In general, the fair value of a cost method investment is not evaluated unless circumstances are present that may have an adverse effect on the fair value. The Company has not identified any such circumstances as of June 30, 2018. The Company did not record any earnings from its ownership of the Class A Units for the three or six months ended June 30, 2018. On November 22, 2016, a subsidiary of the Company purchased 2,272,727 of SNMP’s common units for $25.0 million in a private placement. As of June 30, 2018, this ownership represents approximately 14.20% of SNMP’s outstanding common units. Rather than accounting for the investment under the equity method, the Company elected the fair value option to account for its interest in SNMP. The Company records the equity investment in SNMP at fair value at the end of each reporting period. The Company recorded gains related to the investment in SNMP for the three and six months ended June 30, 2018 of approximately $3.3 million and $1.6 million, respectively. In addition, for the three and six months ended June 30, 2018, the Company recorded dividend income of approximately $1.0 million and $2.0 million, respectively, from quarterly dividends on the investment in SNMP. Any gains or losses and dividend income related to the investment in SNMP are recorded as a component of other income (expense) in the condensed consolidated statement of operations. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | Note 10. Fair Value of Financial Instruments Measurements of fair value of derivative instruments are classified according to the fair value hierarchy, which prioritizes the inputs to the valuation techniques used to measure fair value. Fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified and disclosed in one of the following categories: Level 1: Measured based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2: Measured based on quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Substantially all of these inputs are observable in the marketplace throughout the term of the instrument, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace. Level 3: Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e., supported by little or no market activity). Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. Fair Value on a Recurring Basis The following tables set forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 (in thousands): As of June 30, 2018 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Cash equivalents $ 357,643 $ — $ — $ 357,643 Equity investment: Investment in SNMP 26,818 — — 26,818 Investment in Lonestar 12,660 — — 12,660 Oil derivative instruments: Swaps — (117,479) — (117,479) Call swaptions — (8,178) — (8,178) Gas derivative instruments: Swaps — 3,375 — 3,375 Other: Embedded derivative instruments — (7,604) — (7,604) Earnout derivative asset — — 7,928 7,928 Total $ 397,121 $ (129,886) $ 7,928 $ 275,163 As of December 31, 2017 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Cash equivalents $ 49,071 $ — $ — $ 49,071 Equity investment: Investment in SNMP 25,227 — — 25,227 Investment in Lonestar 5,955 — — 5,955 Oil derivative instruments: Swaps — (66,204) — (66,204) Call swaptions — (3,431) — (3,431) Gas derivative instruments: Swaps — 15,380 — 15,380 Other: Embedded derivative instruments — (1,551) — (1,551) Total $ 80,253 $ (55,806) $ — $ 24,447 Financial Instruments : The Level 1 instruments presented in the tables above consist of money market funds and time deposits included in cash and cash equivalents on the Company’s condensed consolidated balance sheets at June 30, 2018 and December 31, 2017. The Company’s money market funds and time deposits represent cash equivalents backed by the assets of high-quality banks and financial institutions. The Company identified the money market funds and time deposits as Level 1 instruments due to the fact that these instruments have daily liquidity, quoted prices for the underlying investments can be obtained and there are active markets for the underlying investments. In addition, the Level 1 instruments include the Company’s equity investment in common units of SNMP as further discussed in Note 9, “Investments.” The investment in SNMP is being accounted for under the fair value option and included in investments on the Company’s condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017. The Company identified the common units in SNMP as a Level 1 instruments due to the fact that SNMP is a publicly traded company on the NYSE American with daily quoted prices that can be readily obtained. The Level 1 instruments also include the Company’s investment in the common shares of Lonestar as further discussed in Note 9, “Investments.” The investment in the Lonestar common shares is being accounted for at fair value and included in investments on the Company’s condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017. The Company identified the Lonestar common shares as Level 1 instruments due to the fact that Lonestar is a publicly traded company on the Nasdaq Global Market exchange, with daily quoted prices that can be readily obtained. The Company’s commodity derivative instruments consist of swaps and call swaptions as of June 30, 2018 and December 31, 2017 in the table above. The fair values of the Company’s derivatives are based on third-party pricing models which utilize inputs that are either readily available in the public market, such as forward curves, or can be corroborated from active markets of broker quotes. Swaps generally have observable inputs and they are classified as Level 2. Call swaption derivatives have inputs which are observable, either directly or indirectly, using market data. As of June 30, 2018 and December 31, 2017, the Company believed that substantially all of the inputs required to calculate the fair value of swaps and call swaptions are observable in the marketplace throughout the term of these derivative instruments or supported by observable levels at which transactions are executed in the marketplace and are, therefore, classified as Level 2. Derivative instruments are also subject to the risk that counterparties will be unable to meet their obligations. Such non-performance risk is considered in the valuation of the Company’s derivative instruments, but to date has not had a material impact on estimates of fair values. Significant changes in the quoted forward prices for commodities and changes in market volatility generally lead to corresponding changes in the fair value measurement of the Company’s derivative instruments. There were no commodity derivative instruments classified as Level 3 as of June 30, 2018 or December 31, 2017. Embedded Derivatives : The Company consummated contracts for the purchase of sand and fractionation stimulation services that contain provisions that are required to be bifurcated from the contract and valued as a derivative. The embedded derivatives are using a Monte Carlo simulation model which utilizes observable inputs, including the NYMEX WTI oil price and the NYMEX Henry Hub natural gas price at various points in time. As of June 30, 2018 and December 31, 2017, the Company believes that substantially all of the inputs required to calculate the embedded derivatives are observable in the marketplace throughout the term of these derivative instruments or supported by observable levels at which transactions are executed in the marketplace, and are, therefore, classified as Level 2 inputs. Changes in the inputs will impact the fair value measurement of the Company's embedded derivative contracts. Earnout Derivative: As part of the Carnero Gathering Disposition, we are entitled to receive earnout payments from SNMP based on natural gas delivered above a threshold volume and tariff at Carnero Gathering pipeline’s delivery points. These payments were deemed to be a derivative; the resulting earnout derivative was valued through the use of a Monte Carlo simulation model which utilized observable inputs such as the earnout price and volume commitment, as well as unobservable inputs related to the weighted probabilities of various throughput scenarios. We have therefore classified the fair value measurements of the earnout derivative as Level 3. The following table sets forth a reconciliation of changes in the fair value of the Company’s earnout derivative instruments classified as Level 3 in the fair value hierarchy (in thousands): June 30, 2018 Beginning balance $ — Initial fair value of earnout derivative 6,401 Gain on earnout derivative 1,527 Ending balance $ 7,928 Fair Value on a Non‑Recurring Basis The Company follows the provisions of ASC 820-10 for nonfinancial assets and liabilities measured at fair value on a non-recurring basis. Fair value measurements of assets acquired and liabilities assumed in business combinations are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of acquired properties is based on market and cost approaches. Our purchase price allocation for the Comanche Acquisition is presented in Note 4, “Acquisitions and Divestitures.” Liabilities assumed include asset retirement obligations existing at the date of acquisition. Asset retirement obligation estimates are derived from historical costs as well as management’s expectation of future cost environments. As there is no corroborating market activity to support the assumptions, the Company has designated these liabilities as Level 3. A reconciliation of the beginning and ending balances of the Company’s asset retirement obligations is presented in Note 11, “Asset Retirement Obligations.” As previously stated, the Company follows the provisions of ASC 820‑10 for nonfinancial assets and liabilities measured at fair value on a non‑recurring basis. The fair value measurements of assets acquired and liabilities assumed in the SR legal settlement are based on inputs that are not observable in the market and thus represent Level 3 inputs. The fair value of acquired properties is based on market and cost approaches. The allocation of fair value to the assets and liabilities assumed as part of the SR legal settlement is presented in Note 12, “Related Party Transactions.” Liabilities assumed include asset retirement obligations existing and short-term debt held by Sanchez Resources at the date of transfer. Asset retirement obligation estimates are derived from historical costs as well as management’s expectation of future cost environments. As there is no corroborating market activity to support the assumptions, the Company has designated these liabilities as Level 3. Additional discussion of the SR legal settlement can be found in Note 12, “Related Party Transactions.” A reconciliation of the beginning and ending balances of the Company’s asset retirement obligations is presented in Note 11, “Asset Retirement Obligations.” In connection with the exchange agreements entered into in February, May and August 2014 by the Company with certain holders of the Company’s Series A Preferred Stock and Series B Preferred Stock, the Company issued common stock according to the conversion rate pursuant to each agreement and additional shares to induce the holders of the preferred stock to convert prior to the date the Company could mandate conversion. In addition, on November 20, 2015, a holder of our Series B Preferred Stock exercised its right to convert 4,500 shares of our Series B Preferred Stock, at the prescribed initial conversion rate of 2.337 shares of common stock per share of Series B Preferred Stock, in exchange for 10,517 shares of our common stock. The fair value of the common stock issued is based on the price of the Company’s common stock on the date of issuance. There were no conversions of Series A Preferred Stock or Series B Preferred Stock into shares of the Company’s common stock during the six months ended June 30, 2018 and year ended December 31, 2017. As there is an active market for the Company’s common stock, the Company has designated this fair value measurement as Level 1. A detailed description of the Company’s common stock and preferred stock issuances and redemptions is presented in Note 14, “Stockholders’ and Mezzanine Equity.” The Company did not record a proved property impairment during the six months ended June 30, 2018 and year ended December 31, 2017. Fair Value of Other Financial Instruments The carrying amounts of our oil and natural gas receivables, accounts payable and accrued liabilities approximate fair value due to their highly liquid nature. The registered 7.75% Notes and 6.125% Notes are traded in an active market, and as such, are classified as Level 1 financial instruments. The estimated fair value of the 7.75% Notes and 6.125% Notes was $514.0 million and $788.9 million as of June 30, 2018, respectively, and was calculated using quoted market prices based on trades of such debt as of that date. The 7.25% Senior Secured Notes are classified as Level 1 financial instruments as they are traded in an active market under Rule 144A by institutional investors. The estimated fair value of the 7.25% Senior Secured Notes was $495.0 million as of June 30, 2018 and was calculated using quoted market prices based on trades of such debt as of that date. |
Asset Retirement Obligations
Asset Retirement Obligations | 6 Months Ended |
Jun. 30, 2018 | |
Asset Retirement Obligations | |
Asset Retirement Obligations | Note 11. Asset Retirement Obligations The Company’s asset retirement obligations represent the present value of the estimated cash flows expected to be incurred to plug, abandon and remediate producing properties, excluding salvage values, at the end of their productive lives in accordance with applicable laws. Revisions in estimated liabilities during the period relate primarily to changes in estimates of asset retirement costs. Revisions in estimated liabilities can also include, but are not limited to, revisions of estimated inflation rates, changes in property lives, and the expected timing of settlement. The changes in the asset retirement obligation for the six months ended June 30, 2018 and the year ended December 31, 2017 were as follows (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Abandonment liability, beginning of period $ 36,098 $ 25,087 Liabilities incurred during period 1,018 4,968 Acquisitions — 8,289 Divestitures (158) (3,538) Revisions — (1,343) Accretion expense 1,541 2,635 Abandonment liability, end of period $ 38,499 $ 36,098 |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions | |
Related Party Transactions | Note 12. Related Party Transactions SOG, headquartered in Houston, Texas, is a private full service oil and natural gas company engaged in the exploration and development of oil and natural gas primarily in the South Texas and onshore Gulf Coast areas on behalf of its affiliates, including the Company, pursuant to existing management service agreements. The Company refers to SOG and its affiliates (but excluding the Company) collectively as the “Sanchez Group.” Mr. Eduardo A. Sanchez and Ana Lee Sanchez Jacobs, immediate family members of the Executive Chairman of the Board, our Chief Executive Officer and an Executive Vice President of the Company, collectively with such individuals, either directly or indirectly, own 100% of the equity interests of SOG; these individuals, as well as Mr. Eduardo A. Sanchez and Ms. Ana Lee Sanchez Jacobs, are officers of SOG. In addition, Antonio R. Sanchez, Jr. is the sole member of the board of directors of SOG. The Company does not have any employees. On December 19, 2011, the Company entered into the Services Agreement with SOG pursuant to which specified employees of SOG provide certain services with respect to the Company’s business under the direction, supervision and control of SOG. Pursuant to this arrangement, SOG performs centralized corporate functions for the Company, such as general and administrative services, geological, geophysical and reserve engineering, lease and land administration, marketing, accounting, operational services, information technology services, compliance, insurance maintenance and management of outside professionals. The Company compensates SOG for the services at a price equal to SOG’s cost of providing such services, including all direct costs and indirect administrative and overhead costs (including the allocable portion of salary, bonus, incentive compensation and other amounts paid to persons that provide the services on SOG’s behalf) allocated in accordance with SOG’s regular and consistent accounting practices, including for any such costs arising from amounts paid directly by other members of the Sanchez Group on SOG’s behalf or borrowed by SOG from other members of the Sanchez Group, in each case, in connection with the performance by SOG of services on the Company’s behalf. The Company also reimburses SOG for sales, use or other taxes, or other fees or assessments imposed by law in connection with the provision of services to the Company (other than income, franchise or margin taxes measured by SOG’s net income or margin and other than any gross receipts or other privilege taxes imposed on SOG) and for any costs and expenses arising from or related to the engagement or retention of third-party service providers. Salaries and associated benefits of SOG employees are allocated to the Company based on a detailed analysis of actual time spent by the professional staff on Company projects and activities. The allocation is reviewed at least annually and is adjusted as necessary. General and administrative expenses such as office rent, utilities, supplies and other overhead costs, are allocated on the same basis as the SOG employee salaries. Expenses allocated to the Company for general and administrative expenses and oil and natural gas production expenses for the three months ended June 30, 2018 and 2017, were $15.6 million and $18.7 million, respectively, and expenses allocated to the Company for general and administrative expenses and oil and natural gas production expenses for the six months ended June 30, 2018 and 2017 were $33.5 million and $34.2 million, respectively. As of June 30, 2018 and December 31, 2017, the Company had a net receivable from SOG and other members of the Sanchez Group of $6.2 million and $4.5 million, respectively, which are reflected as “Accounts receivable—related entities” in the condensed consolidated balance sheets. The net receivable as of June 30, 2018 and December 31, 2017 consists primarily of advances paid related to general and administrative and other costs paid to SOG. As of June 30, 2018 and December 31, 2017, the Company had a net payable to SNMP of approximately $4.7 million and $9.8 million, respectively, that consists primarily of the accrual for fees associated with the gathering agreement signed with SNMP as part of the Company’s sale of SN Catarina’s interests in Catarina Midstream, LLC, a wholly-owned subsidiary of SN Catarina (the “Western Catarina Midstream Divestiture”), which is reflected in the “Accrued Liabilities - Other” account on the condensed consolidated balance sheets. On June 30, 2017, the gathering agreement was amended to, among other things, provide for an additional, incremental infrastructure fee (the “Incremental Infrastructure Fee”) payable to SNMP of $1.00 per barrel of water delivered by SNMP on or after April 1, 2017 through and including March 31, 2018 and to eliminate certain late payment fees from SN Catarina to SNMP. The parties have agreed to continue the Incremental Infrastructure Fee on a month-to-month basis. On September 1, 2017, SN Catarina entered into an agreement with Seco Pipeline, LLC, (“Seco Pipeline”) a wholly owned subsidiary of SNMP, whereby Seco Pipeline transports certain quantities of natural gas on a firm basis for $0.22 per MMbtu delivered on or after September 1, 2017. This agreement had an initial term of one month that expired on September 30, 2017, but the agreement has continued month-to-month and will continue to do so until terminated by either party. In May 2018, SNMP executed a series of agreements with an affiliate of Targa pursuant to which the parties merged their respective 50% interests in Carnero Gathering LLC (“Carnero Gathering”) and Carnero Processing LLC (“Carnero Processing”) to form an expanded 50/50 joint venture in South Texas, Carnero G&P LLC (“Carnero G&P”). In addition to the merger, Targa contributed 100% of the equity interests in the SOII Facility to Carnero G&P, expanding the processing capacity of the joint venture (“Carnero G&P Transaction”). Effective April 1, 2018, SN Maverick and Carnero G&P entered into a Firm Gas Gathering, Processing and Purchase Agreement (the “Carnero Gas Gathering Agreement”) and other related documentation providing for certain gas gathering, treating and processing services in exchange for an approximately 315,000 gross acreage dedication from SN Maverick and its working interest partners. Additionally, effective April 1, 2018, and in connection with the Carnero G&P Transaction, SN Catarina and an affiliate of Targa also amended their Firm Gas Gathering Agreement (the “Amended Gathering Agreement”) and Firm Gas Processing Agreement (the “Amended Processing Agreement”), which were subsequently assigned by the Targa counterparty to Carnero G&P. Antonio R. Sanchez, III, the son of Antonio R. Sanchez, Jr. and brother of Patricio D. Sanchez, is the Company’s Chief Executive Officer and is a member of the board of directors of both the Company and of the general partner of SNMP (“SNMP GP”). Patricio D. Sanchez, an Executive Vice President of the Company, is the President and Chief Operating Officer of SNMP GP and a director of SNMP GP. Eduardo A. Sanchez, the brother of Antonio R. Sanchez, III and Patricio D. Sanchez and the son of Antonio R. Sanchez, Jr., is a director of SNMP GP. Antonio R. Sanchez, Jr., the Executive Chairman of the Board of the Company, Antonio R. Sanchez, III, Eduardo A. Sanchez and Patricio D. Sanchez all directly or indirectly own certain equity interests in the Company, SNMP and SNMP GP. Antonio R. Sanchez, Jr., Antonio R. Sanchez, III, Eduardo A. Sanchez and Patricio D. Sanchez beneficially own approximately 0.72%, 2.47%, 2.42% and 3.52%, respectively, of the SNMP common units outstanding as of June 30, 2018 and, together with Ana Lee Sanchez Jacobs, indirectly own 100% of SNMP GP. SNMP Unit Acquisition On November 22, 2016, a subsidiary of the Company purchased 2,272,727 common units of SNMP for $25.0 million in a private placement (see Note 9, “Investments”). SNMP Lease Option On October 6, 2016, the Company and SN Terminal, LLC (“SNT”), a wholly owned subsidiary of the Company, on the one hand, and SNMP, on the other hand, entered into a Purchase and Sale Agreement (the “Lease Option Purchase Agreement”) pursuant to which SNT sold and conveyed to SNMP an option to acquire a ground lease (the “Lease Option”) to which SNT was a party for a tract of land leased from the Calhoun Port Authority in Point Comfort, Texas. In addition, if the Company or any of its affiliates entered into an option to engage in the construction of or participation in a Project (as defined below) and/or received the benefit of an acreage dedication from an affiliate of the Company relating to a Project, then such option and/or acreage dedication would have also been assigned to SNMP, if SNMP exercised the Lease Option. SNMP would have paid SNT $1.00 if the Lease Option was exercised, along with $250,000 if SNMP or any other person affiliated with SNMP elected to construct, own or operate a marine crude storage terminal on or within five miles of the Port Comfort lease or participated as an investor in the same, within five miles thereof (a “Project”), or the Company or its affiliates conveyed an acreage dedication to or an option regarding a Project. On September 11, 2017, the Company, SNT and SNMP entered into an agreement that terminated the Lease Option. Carnero Processing Disposition On November 22, 2016, SN Midstream sold its membership interests in Carnero Processing to SNMP for an initial payment of $55.5 million and the assumption by SNMP of remaining capital commitments to Carnero Processing, which were estimated at approximately $24.5 million (the “Carnero Processing Disposition”). Carnero Processing is no longer in existence, as its assets have been contributed to Carnero G&P through the Carnero G&P Transaction; however, as part of the disposition, the Company recorded a deferred gain of approximately $7.5 million included in “Other Liabilities” on the condensed consolidated balance sheet as a result of the Amended Processing Agreement that remains in effect between the Company and Carnero G&P. This deferred gain was to be amortized over the term of the Amended Processing Agreement according to volumes processed through the Carnero Processing facility; however, upon adoption of ASC 606, this deferred gain was reversed and opening retained earnings was adjusted as of January 1, 2018. Refer to Note 18, “Revenue Recognition” for additional discussion. Carnero Gathering Disposition On July 5, 2016, SN Midstream sold its membership interests in Carnero Gathering to SNMP for an initial payment of approximately $37.0 million and the assumption by SNMP of remaining capital commitments to Carnero Gathering, estimated at approximately $7.4 million (the “Carnero Gathering Disposition”). In connection with the Carnero G&P Transaction, Carnero Processing merged into Carnero Gathering and Carnero Gathering was renamed Carnero G&P. However, as part of the original disposition of Carnero Gathering, the Company recorded a deferred gain of approximately $8.7 million included in “Other Liabilities” on the condensed consolidated balance sheet as a result of the Amended Gathering Agreement that remains in effect between the Company and Carnero G&P. This deferred gain was to be amortized periodically over the term of the Amended Gathering Agreement according to volumes processed through the Carnero Processing facility; however, upon adoption of ASC 606, this deferred gain was reversed and opening retained earnings was adjusted as of January 1, 2018. The Company recognized an earnout derivative asset related to the Carnero Gathering Disposition in the amount of $6.4 million upon adoption of ASC 606 which is revalued at each reporting period. Refer to Note 8, “Derivative Instruments” for additional discussion of the earnout derivative asset and Note 18, “Revenue Recognition” for additional discussion of the impact of ASC 606. Comanche Acquisition On March 1, 2017, we closed the Comanche Acquisition and, in connection with the closing, entered into a number of transactions with Gavilan, GSO Capital Partners L.P. (“GSO”) and the Blackstone Warrantholders (as defined below), or their affiliates, which are related parties (see Note 4, “Acquisitions and Divestitures”), including (i) the SPA (defined below) with an investment vehicle owned by certain funds managed or advised by GSO (“the GSO Funds”) and a controlled affiliate of GSO, (ii) warrant agreements with the Blackstone Warrantholders, (iii) Registration Rights Agreements (as defined below) with the Blackstone Warrantholders and the GSO Funds, (iv) the Partnership Agreement (as defined below) with an entity controlled by an affiliate of GSO, and (v) the GP LLC Agreement (as defined below) with a controlled affiliate of GSO (see Note 14, “Stockholders’ and Mezzanine Equity”). In addition, in connection with the closing of the Comanche Acquisition, we also entered into (i) separate standstill and voting agreements (the “Standstill Agreements”) with the Blackstone Funds (as defined below) and the GSO Funds, respectively, (ii) an eight-year (subject to earlier termination as provided for therein) joint development agreement (the “JDA”) with Gavilan, (iii) a shareholders agreement (the “Shareholders Agreement”) with Gavilan Holdco, (iv) a management services agreement (the “Management Services Agreement”) with Gavilan Holdco and SN Comanche Manager, and (v) certain marketing agreements with Gavilan. Each Standstill Agreement (i) restricts the ability of each of Blackstone Capital Partners VII L.P. and Blackstone Energy Partners II L.P. (together, the “Blackstone Funds”) and the GSO Funds (and indirectly certain of their affiliates) to take certain actions relating to the acquisition of our securities or assets or participation in our management, (ii) contains a two year lock-up restricting dispositions of the Company’s common stock or the warrants to purchase the Company’s common stock, and (iii) contains an agreement to vote any voting securities of the Company in the same manner as recommended by our Board. Pursuant to the Shareholders Agreement, Gavilan Holdco has the right, but not the obligation, to appoint one observer representative to be present at all regularly scheduled meetings of the full board of directors of the Company. The JDA provides for the administration, operation and transfer of the jointly owned Comanche Assets, and further provides for the (i) establishment of an operating committee to control the timing, scope and budgeting of operations on the Comanche Assets (subject to certain exceptions) and (ii) designation of SN Maverick as operator of the Comanche Assets and certain other interests (subject to forfeiture in the event of certain default events); the JDA also provides for mechanics relating to division of assets and operatorship among the parties, contains restrictions on the indirect or direct transfer of the parties’ interests in the Comanche Assets, including certain tag-along rights and rights of first offer provisions, and provides Gavilan with certain drag-along rights in the event of certain sale transactions, subject to certain exceptions and potential alternative structures or asset divisions. Pursuant to the Management Services Agreement, the Manager serves as manager of Gavilan Holdco’s business and provides comprehensive general, administrative, business and financial services at a price equal to Manager’s actual cost of providing such services (including an “administrative fee” equal to 2% of SOG’s total G&A costs), continuing until the occurrence of one or more events giving Manager or Gavilan Holdco the right to terminate the agreement. At the closing of the Comanche Acquisition, Gavilan Holdco paid $1.0 million to Manager under the agreement. The Management Services Agreement provides that Manager may not bill more than $500,000 of G&A costs per month to Gavilan Holdco (subject to reasonable adjustments that are consistent with market terms as a result of an increase in actual G&A costs incurred, and based upon a reasonable allocation of such costs). We also entered into a back-to-back management arrangement between Manager and SOG, on substantially the same terms and conditions as the Management Services Agreement, pursuant to which Manager delegated to SOG, and SOG agreed to perform for and on behalf of Manager, Manager’s duties and obligations under such services agreement; Manager is required to remit amounts received directly from Gavilan Holdco to Manager, including the $1.0 million paid at closing to Manager, and to pay SOG the 2% administrative fee referred to above. In addition, we entered into a management services agreement between SOG and SN UnSub pursuant to which SOG serves as manager of SN UnSub’s oil and natural gas properties and provides comprehensive general, administrative, business and financial services at a price equal to SOG’s actual cost of providing such services (including an “administrative fee” equal to 2% of SOG’s total G&A costs), with an initial term expiring on March 1, 2024 (subject to earlier termination as provided therein), renewing automatically for additional one-year terms thereafter unless either SN UnSub or SOG delivers written notice to the other of its desire not to renew the term at least 180 days prior to such anniversary date. SOG may not bill G&A costs to SN UnSub in excess of $5 million per calendar year until March 1, 2019, or in excess of $10 million per calendar year thereafter. Pursuant to a crude oil production marketing agreement, a residue gas marketing agreement and a marketing agreement for NGLs between Gavilan and SN Maverick, Gavilan sells all of its production from the Comanche Assets to SN Maverick and SN Maverick purchases all such production from Gavilan, transports and sells such production and remits to Gavilan its proportionate share of the sale proceeds Pursuant to the LLC Agreement of GRHL, GRHL authorized and issued a total of 100 Class A Units to SN Comanche Manager. SN Comanche Manager, as holder of the Class A Units, does not have voting rights with respect to GRHL except regarding amendments to the LLC Agreement that adversely affect the holders of Class A Units, approval of affiliate transactions, or as required by law. Twenty percent of the Class A Units vest on each of the first five anniversaries of the effective date of March 1, 2017. The holders of Class A Units are entitled to distributions from Available Cash, as defined in and subject to the provisions of the LLC Agreement. As of June 30, 2018, no distributions of Available Cash had been made to the Company. SR Settlement On August 11, 2017, the Company, the plaintiffs and all named defendants In re Sanchez Energy Derivative Litigation , Consolidated C.A. No. 9132-VCG in the Court of Chancery of the State of Delaware (the “Court”), relating to the Company’s August 2013 purchase of working interests in the TMS from Sanchez Resources, entered into a Stipulation of Settlement (the “Stipulation”) reflecting the terms of the settlement of the derivative stockholder litigation (the “SR Settlement”). On November 6, 2017, the Stipulation was approved by the Court and became final on December 20, 2017 with an effective date of November 29, 2017, pursuant to which, among other things: (i) the defendants (or their insurance companies) made a payment to the Company of an aggregate of $11.75 million ($5.2 million, net of fees, expenses and other amounts); (ii) the sole member of Sanchez Resources transferred the equity of Sanchez Resources to us; (iii) Sanchez Resources transferred certain royalty interests in the TMS acreage held by Sanchez Resources to us, and (iv) Alan Jackson and Greg Colvin were removed from the Company’s compensation committee. Sanchez Resources and one of its subsidiaries is party to the SR Credit Agreement of which approximately $24.0 million is outstanding. See Note 7, “Debt” for additional discussion of the SR Credit Agreement. The credit facility is solely secured by substantially all of the assets of Sanchez Resources and/or its subsidiary, without recourse to SN or any of its other subsidiaries, consisting of approximately 14,000 net acres largely in the TMS trend. The assets and liabilities underlying the equity interests transferred to the Company were recorded following the provisions of ASC 820 to measure nonfinancial assets and liabilities at fair value. The fair value measurements were based on market and cost approaches utilizing third-party market participant operating and development estimates. The assets and liabilities underlying the equity interests transferred to the Company were recorded at fair value on a preliminary basis as of the date of the transfer as follows (in thousands): Proved oil and natural gas properties $ 15,867 Unproved properties 7,482 Other assets acquired 2,739 Fair value of assets acquired 26,088 Asset retirement obligations (2,092) Fair value of net assets acquired $ 23,996 |
Accrued Liabilities and Other C
Accrued Liabilities and Other Current Liabilities | 6 Months Ended |
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Accrued Liabilities and Other Current Liabilities. | |
Accrued Liabilities and Other Current Liabilities | Note 13. Accrued Liabilities and Other Current Liabilities The following information summarizes accrued liabilities on the condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Capital expenditures $ 93,506 $ 85,340 Other: General and administrative costs 8,440 8,855 Production taxes 5,444 5,084 Ad valorem taxes 7,721 84 Lease operating expenses 26,520 32,152 Interest payable 47,911 34,632 Other accrued liabilities — 3,987 Total accrued liabilities $ 189,542 $ 170,134 The following information summarizes other payables on the condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Revenue payable $ 83,705 $ 72,451 Production tax payable 3,881 2,774 Other 12,865 6,745 Total other payables $ 100,451 $ 81,970 The following information summarizes other current liabilities on the condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Operated prepayment liability $ 41,636 $ 88,999 Deferred gain on Western Catarina Midstream Divestiture - short term 23,720 23,720 Phantom compensation payable - short term 5,751 2,525 Total other current liabilities $ 71,107 $ 115,244 |
Stockholders' and Mezzanine Equ
Stockholders' and Mezzanine Equity | 6 Months Ended |
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Stockholders' and Mezzanine Equity | |
Stockholders' and Mezzanine Equity | Note 14. Stockholders’ and Mezzanine Equity Common Stock Offerings On May 25, 2017, the Company entered into an equity distribution agreement with Citigroup Global Markets, Inc., BMO Capital Markets Corp., Capital One Securities, Inc., RBC Capital Markets, LLC and SunTrust Robinson Humphrey, Inc. and filed with the SEC a prospectus supplement to our shelf registration statement that allows us to issue from time to time shares of our common stock up to an aggregate gross amount of $75 million (the “2017 ATM”). Sales of our common stock, if any, under the 2017 ATM will be made by any method permitted by law deemed to be an “at the market” offering as defined under the Securities Act, including, without limitation, sales made directly on the New York Stock Exchange, on any other existing trading market for our shares of common stock or to or through a market maker or as otherwise agreed by the Company and the sales agent. As of June 30, 2018, we had not issued any shares of our common stock under the 2017 ATM. On February 6, 2017, the Company completed an underwritten public offering of 10,000,000 shares of the Company's common stock at a price to the public of $12.50 per share ($11.7902 per share, net of underwriting discounts). The Company granted the underwriters a 30-day option to purchase up to an additional 1,500,000 shares of the Company’s common stock on the same terms, which was exercised in full and closed on February 6, 2017. The Company received net proceeds of approximately $135.9 million (after deducting underwriting discounts of approximately $7.8 million) from the sale of the shares of common stock. Series A Preferred Stock Offering On September 17, 2012, the Company completed a private placement of 3,000,000 shares of Series A Preferred Stock, which were sold to a group of qualified institutional buyers pursuant to the Rule 144A exemption from registration under the Securities Act. The issue price of each share of the Series A Preferred Stock was $50.00. The Company received net proceeds from the private placement of $144.5 million, after deducting initial purchasers’ discounts and commissions and offering costs of $5.5 million. Each share of Series A Preferred Stock is convertible at any time at the option of the holder thereof at an initial conversion rate of 2.325 shares of common stock per share of Series A Preferred Stock (which is equal to an initial conversion price of $21.51 per share of common stock) and is subject to specified adjustments. As of June 30, 2018, based on the initial conversion price, approximately 4,275,640 shares of common stock would be issuable upon conversion of all of the outstanding shares of the Series A Preferred Stock. The annual dividend on each share of Series A Preferred Stock is 4.875% on the liquidation preference of $50.00 per share and is payable quarterly, in arrears, on each January 1, April 1, July 1 and October 1, when, as and if declared by the Board. The Company may, at its option, pay dividends in cash and, subject to certain conditions, common stock or any combination thereof. Dividends are cumulative, and as of June 30, 2018, all dividends accumulated through that date had been paid. The dividends accrued for the period from April 1 to June 30, 2018, were declared by the Board and paid in cash to the Company’s paying agent on June 29, 2018 and distributed by the agent to holders on July 2, 2018. Except as required by law or the Company’s Amended and Restated Certificate of Incorporation (the “Charter”), holders of the Series A Preferred Stock will have no voting rights unless dividends fall into arrears for six or more quarterly periods (whether or not consecutive). In that event and until such arrearage is paid in full, the holders of the Series A Preferred Stock and the holders of the Series B Preferred Stock, voting as a single class, will be entitled to elect two directors and the number of directors on the Board will increase by that same number. At any time on or after October 5, 2017, the Company may at its option cause all outstanding shares of the Series A Preferred Stock to be automatically converted into common stock at the conversion price, if, among other conditions, the closing sale price (as defined) of the Company’s common stock equals or exceeds 130% of the conversion price for a specified period prior to the conversion. If a holder elects to convert shares of Series A Preferred Stock upon the occurrence of certain specified fundamental changes, the Company will be obligated to deliver an additional number of shares above the applicable conversion rate to compensate the holder for lost option time value of the shares of Series A Preferred Stock as a result of the fundamental change. Series B Preferred Stock Offering On March 26, 2013, the Company completed a private placement of 4,500,000 shares of Series B Preferred Stock. The issue price of each share of the Series B Preferred Stock was $50.00. The Company received net proceeds from the private placement of $216.6 million, after deducting placement agent’s fees and offering costs of $8.4 million. Each share of Series B Preferred Stock is convertible at any time at the option of the holder thereof at an initial conversion rate of 2.337 shares of common stock per share of Series B Preferred Stock (which is equal to an initial conversion price of $21.40 per share of common stock) and is subject to specified adjustments. As of June 30, 2018, based on the initial conversion price, approximately 8,244,539 shares of common stock would be issuable upon conversion of all of the outstanding shares of the Series B Preferred Stock. The annual dividend on each share of Series B Preferred Stock is 6.500% on the liquidation preference of $50.00 per share and is payable quarterly, in arrears, on each January 1, April 1, July 1 and October 1, when, as and if declared by the Board. The Company may, at its option, pay dividends in cash and, subject to certain conditions, common stock or any combination thereof. Dividends are cumulative, and as of June 30, 2018, all dividends accumulated through that date had been paid. The dividends accrued for the period from April 1 to June 30, 2018, were declared by the Board and paid in cash to the Company’s paying agent on June 29, 2018 and distributed by the agent to holders on July 2, 2018. Except as required by law or the Charter, holders of the Series B Preferred Stock will have no voting rights unless dividends fall into arrears for six or more quarterly periods (whether or not consecutive). In that event and until such arrearage is paid in full, the holders of the Series B Preferred Stock and the holders of the Series A Preferred Stock, voting as a single class, will be entitled to elect two directors and the number of directors on the Board will increase by that same number. At any time on or after April 6, 2018, the Company may at its option cause all outstanding shares of the Series B Preferred Stock to be automatically converted into common stock at the conversion price, if, among other conditions, the closing sale price (as defined) of the Company’s common stock equals or exceeds 130% of the conversion price for a specified period prior to the conversion. If a holder elects to convert shares of Series B Preferred Stock upon the occurrence of certain specified fundamental changes, the Company will be obligated to deliver an additional number of shares above the applicable conversion rate to compensate the holder for lost option time value of the shares of Series B Preferred Stock as a result of the fundamental change. NOL Rights Plan On July 28, 2015, the Company entered into a net operating loss carryforwards rights plan (as amended, the “Rights Plan”) with Continental Stock Transfer & Trust Company, as rights agent. In connection therewith, the Board declared a dividend of one preferred share purchase right (“Right”) for each outstanding share of the Company’s common stock. The dividend was paid on August 10, 2015 to stockholders of record as of the close of business on August 7, 2015 (the “NOL Record Date”). In addition, one Right automatically attaches to each share of common stock issued between the NOL Record Date and such date as when the Rights become exercisable. On March 1, 2017, the Company amended the Rights Plan to, among other things, amend certain defined terms to account for the issuance of warrants and grant of shares of common stock to the GSO Funds and the issuance of warrants to the Blackstone Warrantholders in connection with the closing of the Comanche Acquisition. Common Stock and Stock Warrants Issuance At the closing of the Comanche Acquisition pursuant to the Amended and Restated Securities Purchase Agreement (the “SPA”), and subject to the other terms and conditions provided therein: (i) the GSO Funds received 1,455,000 shares of the Company’s common stock and warrants to purchase 1,940,000 shares of the Company’s common stock at an exercise price of $10 per share, subject to customary anti-dilution adjustments; and (ii) Intrepid Private Equity V-A LLC (“Intrepid”) received 45,000 shares of the Company’s common stock and warrants to purchase 60,000 shares of the Company’s common stock at an exercise price of $10 per share, subject to customary anti-dilution adjustments. The warrants issued to the GSO Funds and Intrepid expire on March 1, 2032, in each case in accordance with the terms and conditions of the applicable warrant agreement. Also at the closing of the Comanche Acquisition, the Company entered into (i) three separate warrant agreements to purchase an aggregate of 6,500,000 shares of the Company’s common stock with each of Gavilan Resources Holdings—A, LLC, Gavilan Resources Holdings —B, LLC, and Gavilan Resources Holdings—C, LLC (collectively, the “Blackstone Warrantholders”), that provide for a $10 exercise price per share to purchase the Company’s common stock, subject to customary anti-dilution adjustments. The warrants issued to the Blackstone Warrantholders expire on March 1, 2022 in accordance with the terms and conditions of the applicable warrant agreement. The exercise price and the number of shares of the Company’s common stock for which a warrant is exercisable are subject to adjustment from time to time upon the occurrence of certain events including: (i) payment of a dividend or distribution to holders of shares of the Company’s common stock payable in the Company’s common stock, (ii) a subdivision, combination, or reclassification of the Company’s common stock, (iii) the distribution of any rights, options or warrants (excluding rights issued under the Rights Plan) to all holders of the Company’s common stock entitling them for a certain period of time to purchase shares of the Company’s common stock at a price per share less than the fair market value per share, and (iv) payment of a cash distribution to all holders of the Company’s common stock or a distribution to all holders of the Company’s common stock any shares of the Company’s capital stock, evidences of indebtedness, or any of assets or any rights, warrants or other securities of the Company. The warrant agreements also provide that, if the Company proposes a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, the holders of the warrants will receive the kind and number of other securities or assets which the holder would have been entitled to receive if the holder had exercised the warrant in full immediately prior to the time of such dissolution, liquidation or winding up and the right to exercise the warrant will terminate on the date on which the holders of record of the shares of common stock are entitled to exchange their shares for securities or assets deliverable upon such dissolution, liquidation or winding up. In addition, the Company entered into separate registration rights agreements with the Blackstone Warrantholders, the GSO Funds, and Intrepid (collectively, the “Registration Rights Agreements”). The Registration Rights Agreements grant the parties certain registration rights for the shares of our common stock acquired by the parties, including the shares issuable upon the exercise of the warrants to purchase the Company’s common stock. The Registration Rights Agreements with the Blackstone Warrantholders and the GSO Funds provide that the Company will use its reasonable best efforts to prepare and file a shelf registration statement with the SEC to permit the public resale of all registrable securities covered by the applicable Registration Rights Agreement within 18 months of the date of the agreement and to cause such shelf registration statement to be declared effective no later than two years after the date of the agreement. The Registration Rights Agreements include piggyback rights for the applicable holders, which provide that, if the Company proposes to file certain registration statements or supplements to certain effective registration statements for the sale of shares of the Company’s common stock in an underwritten offering for its own account or that of another person or both, then the Company is required to offer the holders the opportunity to include in such underwritten offering such number of registrable securities as each such holder may request, subject to certain cutback rights if the Company has been advised by the managing underwriter that the inclusion of registrable securities for sale for the benefit of the holders will have an adverse effect on the price, timing or distribution of the shares of common stock in the underwritten offering. SN Comanche Manager, LLC Class A Preferred Unit Member On the Effective Date, pursuant to the LLC Agreement, Gavilan Holdco authorized and issued a total of 100 Class A Units to SN Comanche Manager. GRHL is the parent of Gavilan. SN Comanche Manager, as holder of the Class A Units, does not have voting rights under the LLC Agreement except with respect to amendments to the LLC Agreement that adversely affect the holders of Class A Units, approval of affiliate transactions, or as required by law. Twenty percent of the Class A Units vest on each of the first five anniversaries of the Effective Date. The holders of Class A Units are entitled to distributions from Available Cash (as defined in the LLC Agreement) subject to the provisions of the LLC Agreement. SN UnSub Preferred Unit Issuance At the closing of the Comanche Acquisition, pursuant to the SPA and subject to the other terms and conditions provided therein, the GSO Funds purchased 485,000 preferred units of SN UnSub for $485,000,000 and Intrepid purchased 15,000 preferred units of SN UnSub for $15,000,000 (in aggregate, the “SN UnSub Preferred Units”). The applicable parties entered into an amended and restated partnership agreement of SN UnSub (the “Partnership Agreement”) and an amended and restated limited liability company agreement of SN UnSub General Partner (the “GP LLC Agreement”). Under the terms of the Partnership Agreement, holders of the SN UnSub Preferred Units are entitled to receive distributions of 10.0% per annum, payable quarterly in cash, unless a cash payment is then prohibited by certain of SN UnSub’s debt agreements, in which case such distribution will be deemed to have been paid in kind. SN UnSub may not make distributions on the SN UnSub common units until the preferred units are redeemed in full. The SN UnSub Preferred Units have priority over the common units, to the extent of the Base Return (as defined below), upon a liquidation, sale of all or substantially all assets, certain change of control and exit transactions. SN UnSub may, from time to time and subject to the conditions set forth in the Partnership Agreement and the SN UnSub Credit Agreement, redeem SN UnSub Preferred Units at a purchase price per unit sufficient to achieve the greater of (i) the amount required to cause the return on investment with respect to each such SN UnSub Preferred Unit to be equal to the product of (x) 1.5 multiplied by (y) the purchase price per unit and (ii) the amount required to cause the internal rate of return with respect to each SN UnSub Preferred Unit to be equal to 14.0%, in each case inclusive of previous distributions made in cash (the “Base Return”). Partners holding a majority of the SN UnSub Preferred Units will have the option to request SN UnSub to redeem all of the preferred units for the Base Return at any time following the seventh anniversary of issuance or upon the occurrence of certain change of control transactions, as further described in the Partnership Agreement. If (i) the SN UnSub Preferred Units are not timely redeemed by SN UnSub when required, (ii) SN UnSub fails, after March 1, 2018, to pay the holders of the SN UnSub Preferred Units a cash distribution in any two quarters, regardless of whether consecutive, and such failure is continuing, (iii) SN UnSub takes certain material actions without the consent of the holders of the SN UnSub Preferred Units, when required, (iv) certain events of default under SN UnSub and the Company’s credit agreements have occurred or (v) SN Maverick is removed as operator under the JDA under certain circumstances, then a controlled affiliate of GSO will be entitled to appoint a majority of the members of the board of directors of SN UnSub General Partner and may cause a sale of the assets or equity of SN UnSub in order to redeem the SN UnSub Preferred Units. The SN UnSub Preferred Units issued in March 2017 are accounted for as mezzanine equity in the condensed consolidated balance sheet consisting of the following as of June 30, 2018 and December 31, 2017, respectively, (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Mezzanine equity beginning balance $ 427,512 $ — Private placement of SN UnSub Preferred Units — 500,000 Discount — (90,527) Accretion of Discount 12,119 18,039 Dividends accrued (1) 25,000 41,667 Dividends prepaid (2) (2,592) — Dividends/distributions paid (3) (9,908) (41,667) Total mezzanine equity $ 452,131 $ 427,512 (1) In accordance with the Partnership Agreement and SN UnSub Credit Agreement, cash distributions for the 10% dividend on the SN UnSub Preferred Units were prohibited through February 28, 2018, and thus, the dividends for the year ended December 31, 2017 were deemed to have been accrued and offset by the tax distributions paid. The dividends for the first and second quarters of 2018 were accrued and paid in cash on March 30, 2018 and July 2, 2018, respectively. (2) In 2017, tax distributions of approximately $2.6 million were paid in excess of the accrued dividend. The excess distribution was offset against a portion of the dividend accrued and paid during the three months ended March 31, 2018. (3) Distributions paid in 2017 represent tax distributions from available cash to holders of the SN UnSub Preferred Units. The Partnership Agreement provides that tax distributions shall be treated as advances of and shall be offset against any amounts holders of the SN UnSub Preferred Units are entitled to receive. Earnings (Loss) Per Share— The following table shows the computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2018 and 2017 (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Net income (loss) $ (34,987) $ 52,988 $ (39,804) $ 68,723 Less: Preferred stock dividends (3,987) (3,987) (7,974) (7,974) Preferred unit dividends and distributions (12,500) (10,950) (22,408) (27,415) Preferred unit amortization (6,189) (5,282) (12,119) (6,992) Net income (loss) allocable to participating securities (1)(2) — (2,378) — (1,974) Net income (loss) attributable to common stockholders $ (57,663) $ 30,391 $ (82,305) $ 24,368 Weighted average number of unrestricted outstanding common shares used to calculate basic net income (loss) per share 81,787 76,395 81,356 73,045 Dilutive shares (3)(4)(5) — 12,620 — 100 Denominator for diluted earnings (loss) per common share 81,787 89,015 81,356 73,145 Net income (loss) per common share - basic $ (0.71) $ 0.40 $ (1.01) $ 0.33 Net income (loss) per common share - diluted $ (0.71) $ 0.39 $ (1.01) $ 0.33 (1) The Company’s restricted shares of common stock are participating securities. (2) For the three and six months ended June 30, 2018, no losses were allocated to participating restricted stock because such securities do not have a contractual obligation to share in the Company’s losses. (3) The three months ended June 30, 2017 excludes 942,841 shares of weighted average restricted stock from the calculation of the denominator for diluted loss per common share as these shares were anti-dilutive. (4) The six months ended June 30, 2017 excludes 1,304,160 shares of weighted average restricted stock and 12,520,179 shares of common stock resulting from an assumed conversion of the Company's Series A Preferred Stock and Series B Preferred Stock from the calculation of the denominator for diluted loss per common share as these shares were anti-dilutive. (5) The three and six months ended June 30, 2018 excludes 2,484,202 and 756,417 shares, respectively, of weighted average restricted stock and 12,520,179 shares of common stock resulting from an assumed conversion of the Company's Series A Preferred Stock and Series B Preferred Stock from the calculation of the denominator for diluted loss per common share as these shares were anti-dilutive. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2018 | |
Stock-Based Compensation | |
Stock-Based Compensation | Note 15. Stock‑Based Compensation At the Annual Meeting of Stockholders of the Company held on May 24, 2016 (“2016 Annual Meeting”), the Company’s stockholders approved the Sanchez Energy Corporation Third Amended and Restated 2011 Long Term Incentive Plan (the “LTIP”). The Board had previously approved the LTIP on April 20, 2016, subject to stockholder approval. The Company’s directors and consultants as well as employees of the Sanchez Group who provide services to the Company are eligible to participate in the LTIP. Awards to participants may be made in the form of stock options, stock appreciation rights, restricted shares, phantom stock, other stock-based awards or stock awards, or any combination thereof. The maximum shares of common stock that may be delivered with respect to awards under the LTIP shall be (i) 17,239,790 shares plus (ii) upon the issuance of additional shares of common stock from time to time after April 1, 2016, an automatic increase equal to the lesser of (A) 15% of such issuance of additional shares of common stock and (B) such lesser number of shares of common stock as determined by the Board or Compensation Committee; provided, however, that shares withheld to satisfy tax withholding obligations are not considered to be delivered under the LTIP. If any award is forfeited, cancelled, exercised, paid, or otherwise terminates or expires without the actual delivery of shares of common stock pursuant to such award (the grant of restricted stock is not a delivery of shares of common stock for this purpose), the shares subject to such award shall again be available for awards under the LTIP. There shall not be any limitation on the number of awards that may be paid in cash. Any shares delivered pursuant an award shall consist, in whole or in part, of shares of common stock newly issued by the Company, shares of common stock acquired in the open market, from any affiliate of the Company, or any combination of the foregoing, as determined by the Board or Compensation Committee in its discretion. The LTIP is administered by the Compensation Committee of the Board as appointed by the Board. The Board may terminate or amend the LTIP at any time with respect to any shares for which a grant has not yet been made. The Board has the right to alter or amend the LTIP or any part of the LTIP from time to time, including increasing the number of shares that may be granted, subject to stockholder approval as may be required by the exchange upon which the shares of common stock are listed at that time, if any. No change may be made in any outstanding grant that would materially reduce the benefits of the participant without the consent of the participant. The LTIP will expire upon its termination by the Board or, if earlier, when no shares remain available under the LTIP for awards. Upon termination of the LTIP, awards then outstanding will continue pursuant to the terms of their grants. The Company records stock-based compensation expense for awards granted to its directors (for their services as directors) in accordance with the provisions of ASC 718, “Compensation—Stock Compensation.” Stock-based compensation expense for these awards is based on the grant-date fair value and recognized over the vesting period using the straight-line method. Awards granted to employees of the Sanchez Group (including those employees of the Sanchez Group who also serve as the Company’s officers) and consultants in exchange for services are considered awards to non-employees and the Company records stock-based compensation expense for these awards at fair value in accordance with the provisions of ASC 505-50, “Equity-Based Payments to Non-Employees.” For awards granted to non-employees, the Company records compensation expenses equal to the fair value of the stock-based award at the measurement date, which is determined to be the earlier of the performance commitment date or the service completion date. Compensation expense for unvested awards to non-employees is revalued at each period end and is amortized over the vesting period of the stock-based award. Stock-based payments are measured based on the fair value of the equity instruments granted, as it is more determinable than the value of the services rendered. For the restricted stock awards granted to non-employees, stock-based compensation expense is based on fair value re-measured at each reporting period and recognized over the vesting period using the straight-line method. Compensation expense for these awards will be revalued at each period end until vested. Forfeitures of restricted stock awards granted to non-employees are accounted for as they are incurred. During the three and six months ended June 30, 2018, the Company issued approximately 2.7 million and 3.2 million shares of restricted common stock pursuant to the LTIP to certain employees (including the Company’s officers) and consultants of SOG, with whom the Company has a services agreement, respectively. These shares of restricted common stock vest in equal annual amounts over a three-year period. In February 2016 and April 2016, the Compensation Committee approved several new forms of agreement for use in equity awards pursuant to the LTIP. The new forms of agreements consist of two new forms of restricted stock award agreements, one of which provides for vesting in equal annual increments over a three year period from the grant date (the “Grant Date”) and the other of which provides for cliff vesting five years after the Grant Date or earlier if the common stock closing price equals or exceeds certain benchmarks as set forth in the form of agreement (the “Performance Accelerated Restricted Stock” or “PARS”), and two new forms of phantom stock agreements payable only in cash, one of which provides for vesting in equal annual increments over a three year period from the Grant Date (the “Phantom Stock”) and the other of which provides for cliff vesting five years after the Grant Date or earlier if the Company’s common stock closing price equals or exceeds certain benchmarks as set forth in the form of agreement (the “Performance Accelerated Phantom Stock” or “PAPS”). No PARS or PAPS were granted during the six months ended June 30, 2018. The PARS, PAPS and Phantom Stock awards granted to certain employees of the Sanchez Group (including those employees of the Sanchez Group who also serve as the Company’s officers) and consultants in exchange for services are considered awards to non-employees and the Company records stock-based compensation expense for these awards at fair value in accordance with the provisions of ASC 718, “Compensation – Stock Compensation.” In accordance with the guidance, the inclusion of market performance acceleration conditions on the PARS does not change the accounting classification as compared to the restricted stock without market performance acceleration conditions, as both are still classified as equity within the Company’s balance sheet. The Phantom Stock awards are required to be settled in cash by the Company and, per the guidance, should be classified as a liability. Compensation expense for the unvested awards is revalued at each period end and is amortized over the vesting period of the stock-based award using the straight-line method. During the three and six months ended June 30, 2018, the Company issued approximately 4.6 million and 5.8 million shares of Phantom Stock pursuant to the LTIP to certain employees of SOG (including the Company’s officers), with whom the Company has a services agreement, respectively. These shares of Phantom Stock vest in equal annual amounts over a three-year period. On March 1, 2017, the Company’s Chief Executive Officer, Executive Chairman of the Board, President, and Chief Operating Officer entered into a new form of agreement for use in equity awards pursuant to the LTIP, for 245,234 target shares of the Company’s common stock, 245,234 target shares of the Company’s common stock, 245,234 target shares of the Company’s common stock, and 81,745 target shares of the Company’s common stock, respectively. The new form of agreement is a performance phantom stock agreement payable in shares of common stock (the “Performance Phantom Stock Agreement”). The shares granted pursuant to the Performance Phantom Stock Agreement (the “Performance Awards”) will vest (if any) in equal annual increments over a five-year period ranging from 0% to 200% of the target phantom shares granted based on the Company’s share price appreciation relative to the share price appreciation of the S&P Oil & Gas Exploration & Production Select Industry Index for each year in the five-year performance period beginning on January 1, 2017 and ending on December 31, 2021, subject to each officer’s continuous service with the Company through each vesting date. For the 2017 performance period applicable to these awards, 0% of the target shares were awarded. The performance awards are considered awards to non-employees and the Company records stock-based compensation expense for these awards at fair value in accordance with the provisions of ASC 718, “Compensation – Stock Compensation.” In accordance with the guidance, the Performance Awards are classified as equity within the Company’s balance sheet, as they are settled in shares of the Company’s common stock. The Performance Awards have graded-vesting features and as such, the compensation expense for the unvested awards is calculated using the graded-vesting method whereby the Company recognizes compensation expense over the requisite service period for each separately vesting tranche of the award as though they were, in substance, multiple awards. In addition, the estimated value of each tranche will be revalued at each period end and amortized over the vesting period. On April 17, 2018, the Company and certain of its key executives entered into new equity award agreements pursuant to the LTIP, whereby the key executives were granted the following performance-based phantom stock awards: Cash-Settled Stock-Settled Target Performance-Based Phantom Shares Chief Executive Officer 506,230 506,230 Executive Chairman of the Board 506,230 506,230 Executive Vice President and Chief Financial Officer 186,916 186,916 Executive Vice President 253,115 253,115 Senior Vice President and Chief Operating Officer 186,916 186,916 The awards were issued pursuant to (i) cash-settled performance phantom stock agreements payable only in cash (the “Cash-Settled Performance-Based Phantom Stock Agreement” or “Cash-Settled PBPS Awards”) and (ii) stock-settled performance phantom stock agreements payable in shares of common stock (the “Stock-Settled Performance-Based Phantom Stock Agreement” or “Stock-Settled PBPS Awards” and together with the Cash-Settled PBPS Awards, the “PBPS Awards”). Vesting of the shares granted pursuant to the PBPS awards will occur over a three-year performance period beginning January 1, 2018 and ending December 31, 2020, subject to each officer’s continuous service with the Company through each vesting date. Such shares will vest (if at all) in equal annual increments ranging from 0% to 200% of the target phantom shares based on four performance criteria: (1) leverage metrics (net debt to EBITDAX ratio); (2) reserves replacement (reserve replacement ratio); (3) LOE/Boe (production expense divided by production); and (4) safety (as measured based on the total recordable incident rate (“TRIR”)). Each performance measure for a calendar year within the performance period is weighted 30% (or 10% in the case of TRIR) to determine the number of phantom shares earned (if any) during that calendar year. The overall results of each performance measure during a calendar year within a performance period are weighted by approximately 33% to determine the number of phantom shares earned (if any) during the entire performance period. The applicable vesting date for each calendar year within the performance period will be 60 days following the end of such calendar year. Vested awards will be settled (i) in the case of Stock-Settled PBPS Awards, by the delivery of one share of Common Stock for each Stock-Settled PBPS Award that vests on the applicable vesting date in a calendar year, and (ii) in the case of Cash-Settled PBPS Awards, by the payment in cash of an amount equal to the fair market value of the Common Stock on the vesting date times the number of Cash-Settled PBPS Awards that vests on the applicable vesting date in a calendar year. Settlement will occur as soon as reasonably practicable following the applicable vesting date, but in all events, no later than the end of the year in which the applicable vesting date occurs. The PBPS Awards are considered awards to non-employees and the Company records stock-based compensation expense for these awards at fair value in accordance with the provisions of ASC 718, “Compensation – Stock Compensation.” In accordance with the guidance, the Cash-Settled PBPS Awards are classified as liabilities within the Company’s balance sheet, as they are required to be settled cash, while the Stock-Settled PBPS Awards are classified as equity within the Company’s condensed consolidated balance sheet, as they are settled in shares of the Company’s common stock. The PBPS Awards have graded-vesting features and as such, the compensation expense for the unvested awards is calculated using the graded-vesting method whereby the Company recognizes compensation expense over the requisite service period for each separately vesting tranche of the award as though they were, in substance, multiple awards. In addition, the estimated value of each tranche will be revalued at each period end and amortized over the vesting period. The Company recognized the following stock-based compensation expense (in thousands) which is included in general and administrative expense in the condensed consolidated statements of operations: Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Restricted stock awards, directors $ 330 $ 619 $ 627 $ 4,601 Restricted stock awards, non-employees 3,023 2,982 2,819 10,548 Performance awards 1,298 734 830 1,277 Phantom stock awards 5,017 3,024 4,119 13,965 Total stock-based compensation expense $ 9,668 $ 7,359 $ 8,395 $ 30,391 Based on the $4.52 per share closing price of the Company’s common stock on June 30, 2018, there was approximately $20.9 million of unrecognized compensation cost related to the non‑vested restricted shares outstanding. The cost is expected to be recognized over an average period of approximately 2.2 years. Based on the $4.52 per share closing price of the Company’s common stock on June 30, 2018, there was approximately $0.5 million of unrecognized compensation cost related to the non‑vested PARS outstanding. The cost is expected to be recognized over an average period of approximately 2.80 years. Based on the $4.52 per share closing price of the Company’s common stock on June 30, 2018, there was approximately $20.3 million of unrecognized compensation cost related to the non‑vested PAPS and Phantom Stock outstanding. The cost is expected to be recognized over an average period of approximately 1.95 years. Based on the estimated per share price of the Performance Awards on June 30, 2018, there was approximately $1.0 million of unrecognized compensation cost related to the Performance Awards. The cost is estimated to be recognized over a weighted average period of approximately 2.9 years. Based on estimated per share price of the common stock underlying the PBPS Awards on June 30, 2018, there was approximately $7.4 million of unrecognized compensation cost related to the PBPS Awards. The cost is estimated to be recognized over a weighted average period of approximately 1.85 years. A summary of the activity of the non-vested restricted shares and PARS for the three and six months ended June 30, 2018 and 2017 is presented below (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Non-vested common stock, beginning of period 3,684 6,336 4,897 6,891 Granted 2,676 282 3,156 2,076 Vested (542) (711) (2,159) (3,060) Forfeited (51) (47) (127) (47) Non-vested common stock, end of period 5,767 5,860 5,767 5,860 As of June 30, 2018, approximately 5.8 million shares remain available for future issuance to participants under the LTIP assuming achievement of the maximum payment under all outstanding Performance Awards and Stock-Settled PBPS Awards. A summary of the activity of the non‑vested Phantom Stock shares and PAPS for the three and six months ended June 30, 2018 and 2017 is presented below (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Non-vested phantom stock and PAPS, beginning of period 3,949 4,690 3,589 4,012 Granted 2,474 191 3,652 1,986 Vested (435) (663) (1,150) (1,780) Forfeited (100) (20) (203) (20) Non-vested phantom stock and PAPS, end of period 5,888 4,198 5,888 4,198 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | Note 16. Income Taxes The Company used a year-to-date effective tax rate method for recording income taxes for the six month periods ended June 30, 2018 and 2017. This method is based on our expectations at June 30, 2018 and 2017 that a small change in our estimated ordinary income could result in a large change in the estimated annual effective tax rate. We will use this method each quarter until such time a return to the annualized effective tax rate method is deemed appropriate. The Company's effective tax rate for the six months ended June 30, 2018 and 2017 was 0.0% and (1.8%,) respectively. The difference between the statutory federal income taxes calculated using a U.S. Federal statutory corporate income tax rate of 21% and the Company’s effective tax rate of 0.0% for the six months ended June 30, 2018 is related to the valuation allowance on deferred tax assets. The Company’s effective tax rate of (1.8%) for the six months ended June 30, 2017 is primarily related to the recording of certain deferred tax liabilities associated with the Comanche Acquisition that were recorded directly to equity, whereas the correlating movement in the valuation allowance was required to be recorded to income tax expense. The Company provides for deferred income taxes on the difference between the tax basis of an asset or liability and its carrying amount in the financial statements in accordance with authoritative guidance for accounting for income taxes. This difference will result in taxable income or deductions in future years when the reported amount of the asset or liability is recovered or settled, respectively. In recording deferred income tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible. The Company believes that after considering all the available objective evidence, both positive and negative, historical and prospective, with greater weight given to historical evidence, management is not able to determine that it is more likely than not that the deferred tax assets will be realized and, therefore, has established a valuation allowance to reduce the deferred tax assets as of June 30, 2018. The Company will continue to assess the valuation allowance against deferred tax assets considering all available information obtained in future reporting periods. At June 30, 2018, the Company had no material uncertain tax positions. On December 22, 2017, the President signed into law Public Law No. 115-97, a comprehensive tax reform bill commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly reforms the Internal Revenue Code of 1986, as amended (the “Code”). Among the many provisions included in the Tax Act is a provision to reduce the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018. We recognized the income tax effects of the Tax Act in accordance with Staff Accounting Bulletin No. 118, which provides SEC staff guidance for the application of ASC 740, “Income Taxes.” The guidance allows for a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. As such, our financial results reflect the provisional income tax effects of the Tax Act for which the accounting under ASC 740 is incomplete, but a reasonable estimate could be determined. We did not identify any items for which the income tax effects of the Tax Act could not be reasonably estimated as of June 30, 2018. We continue to assess the impact of the Tax Act on our business. Our provisional amounts may be adjusted due to changes in interpretations of the Tax Act, legislative action to address questions that arise because of the Tax Act, or changes in accounting standards for income taxes or related interpretations. Any updates or changes to provisional estimates will be reported in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 17. Commitments and Contingencies Litigation From time to time, the Company may be involved in lawsuits that arise in the normal course of its business. We are not aware of any material governmental proceedings against us or contemplated to be brought against us. Catarina Drilling Obligation In connection with the Catarina Acquisition, the undeveloped acreage we acquired is subject to a continuous drilling obligation. Such drilling obligation requires us to drill (i) 50 wells in each annual period commencing on July 1, 2014 and (ii) at least one well in any consecutive 120-day period in order to maintain rights to any future undeveloped acreage. Up to 30 wells drilled in excess of the minimum 50 wells in a given annual period can be carried over to satisfy part of the 50 well requirement in the subsequent annual drilling period on a well-for-well basis. The lease also creates a customary security interest in the production therefrom in order to secure royalty payments to the lessor and other lease obligations. Our current capital budget and plans include the drilling of at least the minimum number of wells required to maintain access to such undeveloped acreage. Comanche Drilling Obligation In connection with the Comanche Acquisition, we, through our subsidiaries, SN Maverick and SN UnSub, and Gavilan, entered into a development agreement with Anadarko. The development agreement requires us to complete and equip 60 wells in each annual period commencing on September 1, 2017 and continuing thereafter until September 1, 2022. The development agreement permits up to 30 wells completed and equipped in excess of the annual 60 well requirement to be carried over to satisfy part of the 60 well requirement in subsequent annual periods on a well-for-well basis. The development agreement contains a parent guarantee of the performance of SN Maverick and SN UnSub. I f we fail to complete and equip the required number of wells in a given year (after applying any qualifying additional wells from previous years), we and Gavilan must pay Anadarko E&P Onshore, LLC a default fee of $0.2 million for each well we do not timely complete and equip. Our current capital budget and plans include the drilling of at least the minimum number of wells required to maintain access to such undeveloped acreage. Lease Payment Obligations As of June 30, 2018, the Company had $158.9 million in lease payment obligations that satisfy operating lease criteria. These obligations include: (i) $75.9 million in payments due with respect to firm commitment of oil and natural gas volumes under the gathering agreement contract signed with SNMP as part of the Western Catarina Midstream Divestiture that commenced on October 14, 2015 and continues until October 13, 2020, (ii) $78.5 million for corporate and field office leases with expiration dates through March 2025, and (iii) $4.5 million for a 10 year acreage lease agreement for a promotional ranch managed by the Company in Kenedy County, Texas. The lease agreement for the acreage in Kenedy County, Texas includes a contractual requirement for the Company to spend a minimum of $4 million to make permanent improvements over the ten year life of the lease. The lease agreement does not specify the timing for such improvements to be made within the lease term. The Company has the right to terminate the lease obligation without penalty at any time with nine months advanced written notice and payment of any accrued leasehold expenses. Volume Commitments As is common in our industry, the Company is party to certain oil and natural gas gathering and transportation and natural gas processing agreements that obligate us to deliver a specified volume of production over a defined time horizon. If not fulfilled, the Company is subject to deficiency payments. As of June 30, 2018, the Company had approximately $2,021.9 million in future commitments related to oil and natural gas gathering and transportation agreements ($664.0 million for 2018 through 2020, $673.5 million from 2021 through 2023, and $684.4 million under commitments expiring after December 31, 2023, in the aggregate) and approximately $571.2 million in future commitments related to natural gas processing agreements ($198.4 million for 2018 through 2020, $113.5 million from 2021 through 2023, and $259.30 million expiring after December 31, 2023, in the aggregate) that are not recorded in the accompanying condensed consolidated balance sheets. For the three and six months ended June 30, 2018, the Company incurred expenses related to deficiency fees of approximately $1.7 million and $2.3 million, respectively, and for the three and six months ended June 30, 2017, the Company incurred expenses related to deficiency fees of approximately $1.4 million and $1.4 million, respectively. These expenses are reported on the condensed consolidated statements of operations in the "Oil and natural gas production expenses" line item. We expect to have additional expenses in 2018 related to our volume commitments. Amended Gathering Agreement and Amended Processing Agreement As of June 30, 2018, the Company had $58.4 million and $57.7 million in payments with respect to firm commitment of natural gas volumes associated with the Carnero Gathering Pipeline and either the Raptor Processing Plant or SOII Facility, respectively, all owned by Carnero G&P and due under the Amended Gathering Agreement and Amended Processing Agreement. These agreements commenced on October 2, 2015 and continue until October 2, 2030. |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2018 | |
Revenue Recognition | |
Revenue Recognition | Note 18. Revenue Recognition Adoption of ASC 606 Effective January 1, 2018, we adopted the new accounting standard ASC 606, “Revenue from Contracts with Customers,” and all the related amendments (collectively referred to as “ASC 606”) to all open contracts using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. For contracts that were modified before the beginning of the earliest reporting period presented, we elected to use a practical expedient permitted under the rules of adoption whereby contracts do not need to be retrospectively restated for contract modifications. Instead, we have reflected the aggregate effect of all modifications that occur before the beginning of the earliest period presented. Adoption of this guidance resulted in the derecognition of $16.3 million in deferred gains recorded under the Carnero Gathering Disposition and Carnero Processing Disposition and the recognition of a $6.4 million derivative asset in the value of the earnout provision owed to us by SNMP with a $22.7 million decrease to accumulated deficit as of January 1, 2018. The earnout derivative asset was marked to market and incurred approximate gains of $1.3 million and $1.5 million, respectively, during the three and six months ended June 30, 2018 as a result. The cumulative effect of the changes made to our consolidated January 1, 2018 condensed consolidated balance sheet for the adoption of ASC 606 were as follows (in thousands): As of Adjustments Due As of Balance Sheet December 31, 2017 to ASC 606 January 1, 2018 Assets Fair value of derivative instruments $ 16,430 $ 150 $ 16,580 Total current assets 350,798 150 350,948 Fair value of derivative instruments 1,428 6,251 7,679 Total assets $ 2,470,635 $ 6,401 $ 2,477,036 Liabilities Other liabilities $ 65,480 $ (16,338) $ 49,142 Total liabilities 2,512,263 (16,338) 2,495,925 Equity Accumulated deficit (1,832,156) 22,739 (1,809,417) Total stockholders' deficit (469,140) 22,739 (446,401) Total liabilities and stockholders' deficit $ 2,470,635 $ 6,401 $ 2,477,036 Revenue from Contracts with Customers Beginning in 2018, we account for revenue from contracts with customers in accordance with ASC 606. The unit of account in ASC 606 is a performance obligation, which is a promise in a contract to transfer to a customer either a distinct good or service (or bundle of goods or services) or a series of distinct goods or services provided over a period of time. ASC 606 requires that a contract’s transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, is to be allocated to each performance obligation in the contract based on relative standalone selling prices and recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied. ASC 606 provides additional clarification related to principal versus agent considerations. We enter into marketing agreements with our non-operating partners to market and sell their share of production to third parties. We have determined that we act as an agent in such arrangements and account for such arrangements on a net basis. Certain of our contracts for the sale of commodities meet the definition of a derivative. We have elected the normal purchases and normal sales scope exception as provided by ASC 815, Derivatives and Hedging, and account for such contracts in accordance with ASC 606. Disaggregation of Revenue We recognized revenue of $259.3 million and $510.5 million for the three and six months ended June 30, 2018, respectively. We disaggregate revenue in our income statement based on product type, and we further disaggregate our revenue related to sales and marketing revenue. In selecting the disaggregation categories, we considered a number of factors, including disclosures presented outside the financial statements, such as in our earnings release and investor presentations, information reviewed internally for evaluating performance, and other factors used by the Company or the users of its financial statements to evaluate performance or allocate resources. As such, we have concluded that disaggregating revenue by product type appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Oil, Natural Gas, and NGL Revenues We recognize revenue from the sale of oil, natural gas and NGLs in the period that the performance obligations are satisfied. Our performance obligations are primarily comprised of the delivery of oil, gas, or NGLs at a delivery point. Each barrel of oil, MMbtu of natural gas, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated. Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer through monthly delivery of oil, natural gas and NGLs. We sell oil at market based prices with adjustments for location and quality. Under our oil sales contracts, we transfer control of the product to the purchaser at the delivery point and recognize revenue based on the contract price. Under our natural gas sales contracts, we deliver natural gas to the purchaser at an agreed upon delivery point. Natural gas is transported from our wellheads to delivery points specified under sales contracts. To deliver natural gas to these points, third parties gather, process and transport our natural gas. We maintain control of the natural gas during gathering, processing, and transportation. We transfer control of the product at the delivery point and recognize revenue based on the contract price. The costs to gather, process and transport the natural gas are recorded as Oil and natural gas production expenses. NGLs, which are extracted from natural gas through processing, are either sold by us directly or by the processor under processing contracts. For NGLs sold by us directly, we transfer control of the product to the purchaser at the delivery point and recognize revenue based on the contract price. The costs to further process and transport NGLs are recorded as Oil and natural gas production expenses. For NGLs sold by the processor, our processing contracts provide that we transfer control to the processor at the tailgate of the processing plant and we recognize revenue based on the price received from the processor. Our contracts with customers typically require payment for oil and condensate, gas and NGL sales within 30 days following the calendar month of delivery. The sales of oil and condensate, gas and NGLs typically include variable consideration that is based on pricing tied to local indices adjusted for differentials and volumes delivered in the current month. Revenues include estimates for the two most recent months using published commodity price indexes and volumes supplied by field operators. Sales and Marketing Revenue Beginning in the first quarter of 2018, we entered into commodity purchase transactions with third parties and then subsequently sold the purchased commodity as separate revenue streams. These purchase contracts were entered into to utilize existing firm transportation arrangements. We retain control of the purchased hydrocarbons prior to delivery to the purchaser. The Company has concluded that we are the principal in these arrangements and therefore we recognize revenue on a gross basis as Sales and Marketing Revenues within our condensed consolidated statement of operations, with costs to purchase and transport the commodity presented as Sales and Marketing Expenses in our condensed consolidated statement of operations. Contracts to sell the third-party hydrocarbons are the same contracts as those for which we sell our produced hydrocarbons, and as such, we do not recognize this revenue any differently than our oil, natural gas, and NGL revenue discussed previously. Remaining Performance Obligations Several of our sales contracts contain multiple performance obligations as each barrel of oil, MMbtu of natural gas, or other unit of measure is separately identifiable. For these contracts, we have taken the optional exception under ASC 606-10-50-14A(b) which is available only for wholly unsatisfied performance obligations for which the criteria in ASC 606-10-32-40 have been met. Under this exception, neither estimation of variable consideration nor disclosure of the transaction price allocated to the remaining performance obligations is required. Revenue is alternatively recognized in the period that the control of the commodity is transferred to the customer and the respective variable component of the total transaction price is resolved. For forms of variable consideration that are not associated with a specific volume and thus do not meet the allocation exception, estimation is required. Examples of such variable consideration consist of deficiency payments, late payment fees, truck rejection charges, inflation adjustments, and imbalance penalties, however, these items are immaterial to our consolidated financial statements and/or have a low probability of occurrence. As significant reversals of revenue due to this variability are not probable, no estimation is required. Contract Balances Under our sales contracts, we invoice customers after our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts do not give rise to contract assets or liabilities under ASC 606. At June 30, 2018 and December 31, 2017, our receivables from contracts with customers were $88.2 million and $101.4 million, respectively. Reconciliation of Condensed Consolidated Balance Sheet In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated balance sheet is as follows (in thousands): As of June 30, 2018 Balances without Effect of change Balance Sheet Adoption ASC 606 higher/(lower) As Reported Assets Fair value of derivative instruments $ 2,979 $ 262 $ 3,241 Total current assets 561,737 262 561,999 Fair value of derivative instruments 1,170 7,666 8,836 Total assets $ 2,896,486 $ 7,928 $ 2,904,414 Liabilities Other liabilities $ 50,670 $ (16,338) $ 34,332 Total liabilities 2,988,496 (16,338) 2,972,158 Equity Accumulated deficit (1,915,986) 24,266 (1,891,720) Total stockholders' deficit (544,141) 24,266 (519,875) Total liabilities and stockholders' deficit $ 2,896,486 $ 7,928 $ 2,904,414 Reconciliation of Condensed Consolidated Statement of Operations In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated statement of operations for the three and six months ended June 30, 2018 is as follows (in thousands): Three Months Ended June 30, 2018 Balances without Effect of change Adoption ASC 606 higher/(lower) As Reported Statement of Operations Other income (expense) $ 5,461 $ 1,254 $ 6,715 Total other income (expense) (106,117) 1,254 (104,863) Income (loss) before income taxes (36,241) 1,254 (34,987) Net income (loss) $ (36,241) $ 1,254 $ (34,987) Six Months Ended June 30, 2018 Balances without Effect of change Adoption ASC 606 higher/(lower) As Reported Statement of Operations Other income (expense) $ 8,616 $ 1,527 $ 10,143 Total other income (expense) (190,194) 1,527 (188,667) Income (loss) before income taxes (41,331) 1,527 (39,804) Net income (loss) $ (41,331) $ 1,527 $ (39,804) We expect the impact of the adoption of the new standard to be immaterial to our net income on an ongoing basis. |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | 6 Months Ended |
Jun. 30, 2018 | |
Condensed Consolidating Financial Information | |
Condensed Consolidating Financial Information | Not Note 19. Condensed Consolidating Financial Information The Company’s 7.75% Notes and 6.125% Notes have been registered with the SEC and are guaranteed by all of the Company’s subsidiaries, except for SN UR Holdings, LLC, SN Services, LLC, SNT, SN Midstream, Manager, SN UnSub General Partner, SN UnSub Holdings, SN UnSub, SN Capital, LLC, Sanchez Resources, SR Acquisition III, LLC and SR TMS, LLC which are unrestricted subsidiaries of the Company. As of June 30, 2018 such guarantor subsidiaries are 100% owned by the Company and the guarantees by these subsidiaries are full and unconditional (except for customary release provisions) and are joint and several. Rule 3-10 of Regulation S-X requires that, in lieu of providing separate financial statements for subsidiary guarantors, condensed consolidating financial information be provided where the subsidiaries have guaranteed the debt of a registered security, where the guarantees are full, unconditional and joint and several and where the voting interest of the subsidiaries are 100% owned by the registrant. The Company has no assets or operations independent of its subsidiaries and there are no significant restrictions upon the ability of its subsidiary guarantors to distribute funds to the Company by dividends or loans. The following is a presentation of condensed consolidating financial information on a parent company, combined guarantor subsidiaries, combined non-guarantor subsidiaries and consolidated basis (in thousands) in accordance with Rule 3-10 of Regulation S-X and should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows, or financial position had such guarantor subsidiaries operated as independent entities. Investments in subsidiaries are accounted for by the respective parent company using the equity method for purposes of this presentation. Results of operations of subsidiaries are, therefore, reflected in the parent company’s investment accounts and earnings. The principal elimination entries set forth below eliminate investments in subsidiaries and intercompany balances and transactions. Typically in a condensed consolidating financial statement, the net income and equity of the parent company equals the net income and equity of the consolidated entity. A summary of the condensed consolidated guarantor balance sheets as of June 30, 2018 and December 31, 2017 is presented below (in thousands): June 30, 2018 Assets Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total current assets $ 633,669 $ 112,281 $ 125,872 $ (309,823) $ 561,999 Total oil and natural gas properties, net 121,408 1,345,142 767,398 — 2,233,948 Investment in subsidiaries 1,247,762 — (7,279) (1,240,483) — Other assets 11,824 9,825 86,818 — 108,467 Total Assets $ 2,014,663 $ 1,467,248 $ 972,809 $ (1,550,306) $ 2,904,414 Liabilities and Shareholders' Equity Current liabilities $ 199,403 $ 348,978 $ 264,888 $ (309,823) $ 503,446 Long-term liabilities 2,214,683 58,526 195,503 — 2,468,712 Mezzanine equity — — 452,131 — 452,131 Total shareholders' equity (deficit) (399,423) 1,059,744 60,287 (1,240,483) (519,875) Total Liabilities and Shareholders' Equity (deficit) $ 2,014,663 $ 1,467,248 $ 972,809 $ (1,550,306) $ 2,904,414 December 31, 2017 Assets Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total current assets $ 447,984 $ 98,758 $ 117,031 $ (312,975) $ 350,798 Total oil and natural gas properties, net 3,987 1,275,153 748,319 — 2,027,459 Investment in subsidiaries 1,081,692 — (7,280) (1,074,412) — Other assets 25,451 4,415 62,512 — 92,378 Total Assets $ 1,559,114 $ 1,378,326 $ 920,582 $ (1,387,387) $ 2,470,635 Liabilities and Shareholders' Equity Current liabilities $ 212,026 $ 312,531 $ 250,946 $ (312,975) $ 462,528 Long-term liabilities 1,827,072 26,787 195,876 — 2,049,735 Mezzanine equity — — 427,512 — 427,512 Total shareholders' equity (deficit) (479,984) 1,039,008 46,248 (1,074,412) (469,140) Total Liabilities and Shareholders' Equity (deficit) $ 1,559,114 $ 1,378,326 $ 920,582 $ (1,387,387) $ 2,470,635 A summary of the condensed consolidated guarantor statements of operations for the three and six months ended June 30, 2018 and 2017 is presented below (in thousands): Three Months Ended June 30, 2018 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 178,842 $ 80,472 $ — $ 259,314 Total operating costs and expenses (24,721) (125,167) (39,684) 134 (189,438) Other income (81,192) (5,766) (17,771) (134) (104,863) Income (loss) before income taxes (105,913) 47,909 23,017 — (34,987) Income tax benefit — — — — — Equity in income (loss) of subsidiaries 70,926 — — (70,926) — Net income (loss) $ (34,987) $ 47,909 $ 23,017 $ (70,926) $ (34,987) Three Months Ended June 30, 2017 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 111,302 $ 64,402 $ — $ 175,704 Total operating costs and expenses (22,154) (70,345) (53,921) — (146,420) Other income 7,856 5,278 10,315 — 23,449 Income (loss) before income taxes (14,298) 46,235 20,796 — 52,733 Income tax benefit 18 237 — — 255 Equity in income (loss) of subsidiaries 67,268 — — (67,268) — Net income (loss) $ 52,988 $ 46,472 $ 20,796 $ (67,268) $ 52,988 Six Months Ended June 30, 2018 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 346,328 $ 164,212 $ — $ 510,540 Total operating costs and expenses (40,252) (207,833) (113,862) 270 (361,677) Other income (expense) (147,959) (5,263) (35,175) (270) (188,667) Income (loss) before income taxes (188,211) 133,232 15,175 — (39,804) Income tax benefit (expense) — — — — — Equity in income (loss) of subsidiaries 148,407 — — (148,407) — Net income (loss) $ (39,804) $ 133,232 $ 15,175 $ (148,407) $ (39,804) Six Months Ended June 30, 2017 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 223,130 $ 86,416 $ — $ 309,546 Total operating costs and expenses (86,727) (124,950) (75,832) 501 (287,008) Other income (expense) (3,378) 10,393 38,463 (501) 44,977 Income (loss) before income taxes (90,105) 108,573 49,047 — 67,515 Income tax benefit (expense) 1,208 — — — 1,208 Equity in income (loss) of subsidiaries 157,620 — — (157,620) — Net income (loss) $ 68,723 $ 108,573 $ 49,047 $ (157,620) $ 68,723 A summary of the condensed consolidated guarantor statements of cash flows for the six months ended June 30, 2018 and 2017 is presented below (in thousands): Six Months Ended June 30, 2018 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Net cash provided by (used in) operating activities $ (107,425) $ 206,878 $ 55,841 $ — $ 155,294 Net cash provided by (used in) investing activities (49,514) (251,777) (53,336) 47,669 (306,958) Net cash provided by (used in) financing activities 423,387 15,853 13,348 (47,669) 404,919 Net increase (decrease) in cash and cash equivalents 266,448 (29,046) 15,853 — 253,255 Cash and cash equivalents, beginning of period 86,937 29,046 68,451 — 184,434 Cash and cash equivalents, end of period $ 353,385 $ — $ 84,304 $ — $ 437,689 Six Months Ended June 30, 2017 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Net cash provided by (used in) operating activities $ (137,380) $ 173,301 $ 23,840 $ — $ 59,761 Net cash provided by (used in) investing activities (251,400) (419,849) (758,933) 236,270 (1,193,912) Net cash provided by (used in) financing activities 108,675 246,548 641,528 (236,270) 760,481 Net increase (decrease) in cash and cash equivalents (280,105) — (93,565) — (373,670) Cash and cash equivalents, beginning of period 343,941 157,976 — 501,917 Cash and cash equivalents, end of period $ 63,836 $ — $ 64,411 $ — $ 128,247 |
Variable Interest Entities
Variable Interest Entities | 6 Months Ended |
Jun. 30, 2018 | |
Variable Interest Entities | |
Variable Interest Entities | Note 20. Variable Interest Entities During the first quarter 2016, the Company adopted ASU 2015-02, “Consolidation—Amendments to the Consolidation Analysis,” which introduces a separate analysis for determining if limited partnerships and similar entities are variable interest entities (“VIEs”) and clarifies the steps a reporting entity would have to take to determine whether the voting rights of stockholders in a corporation or similar entity are substantive. As noted previously in Note 9, “Investments,” pursuant to the LLC Agreement of GRHL, GRHL authorized and issued a total of 100 Class A Units to SN Comanche Manager. Although the Company did not pay any cash for the Class A Units, the Company’s investment in GRHL represents a VIE that could expose the Company to losses limited to the estimated fair value of the investment. The carrying amounts of the investment in GRHL and the Company’s maximum exposure to loss as of June 30, 2018, was approximately $7.3 million. The Company did not record any earnings from its ownership of the Class A Units for the six months ended June 30, 2018. The Company determined that Blackstone is the primary beneficiary of the VIE as the Company has no significant voting rights in GRHL under the LLC Agreement and no power over decisions related to the business activities of GRHL, other than operation of the properties. As noted above in Note 9, “Investments,” the Company, via SN Catarina, purchased from a subsidiary of Targa a 10% undivided interest in the SOII Facility in 2015. The Company determined that ownership in the SOII Facility is more similar to limited partnerships than corporations. Under the revised guidance of ASU 2015-02, a limited partnership or similar entity with equity at risk will not be a VIE if they are able to exercise kick-out rights over the general partner(s) or they are able to exercise substantive participating rights. On June 14, 2017, SN Catarina completed the disposition of the SOII Facility (the “SOII Disposition”) for $12.5 million in cash. Prior to the SOII Disposition, we concluded that the investment in SOII Facility is a VIE under the revised guidance because we could not remove Targa as operator and we did not have substantive participating rights. In addition, Targa had the discretion to direct activities of the VIEs regarding the risks associated with price, operations, and capital investment which have the most significant impact on the VIEs economic performance. The Company had previously accounted for the VIE as an equity method investment and determined that Targa is the primary beneficiary of the VIE as Targa is the operator of the SOII Facility and has the most influence with respect to the normal day-to-day operating decisions of the facility. Prior to the sale, we included the VIE in the “Other Assets - Investments” long-term asset line on the balance sheet. As noted above in Note 9, “Investments,” in November 2016, the Company purchased common units of SNMP for $25.0 million as part of a private equity issuance. Rather than accounting for the investment under the equity method, the Company elected the fair value option to account for its interest in SNMP. The Company’s investment in SNMP represents a VIE that could expose the Company to losses limited to the equity in the investment at any point in time. The carrying amounts of the investment in SNMP and the Company’s maximum exposure to loss as of June 30, 2018, was approximately $26.8 million. Below is a tabular comparison of the carrying amounts of the assets and liabilities of the VIE and the Company’s maximum exposure to loss as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Beginning Balance $ 32,507 $ 39,656 Initial investment in GRHL — 7,280 Distributions from equity investments — (311) Gain (loss) from change in fair value of investment in SNMP 1,591 (1,591) Sale of investments — (12,527) Maximum exposure to loss $ 34,098 $ 32,507 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events. | |
Subsequent Events | Note 21. Subsequent Events On July 27, 2018, the Company and Continental Stock Transfer & Trust Company, as rights agent (the “Rights Agent”), entered into a second amendment to the Rights Agreement, dated as of July 28, 2015, between the Company and the Rights Agent (the “Rights Plan”) to extend the “Final Expiration Date” of the preferred share purchase rights (the “Rights”) pursuant to the Rights Plan from July 27, 2018 to July 26, 2021. The Board adopted the Rights Plan in an effort to prevent the imposition of significant limitations under Section 382 of the Internal Revenue Code of 1986, as amended (the ‘‘Code’’), on its ability to utilize its current NOLs to reduce its future tax liabilities. If the Company experiences an ‘‘ownership change,’’ as defined in Section 382 of the Code, the Company’s ability to fully utilize the NOLs on an annual basis will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of those benefits. In general terms, the Rights Plan works by imposing a significant penalty upon any person or group that acquires 4.9% or more of the outstanding common stock without the approval of the Board (an ‘‘Acquiring Person’’). The Rights Plan also gives discretion to the Board to determine that someone is an Acquiring Person even if they do not own 4.9% or more of the outstanding common stock but do own 4.9% or more in value of the Company’s outstanding stock, as determined pursuant to Section 382 of the Code and the regulations promulgated thereunder. Stockholders who as of July 28, 2015, owned 4.9% or more of the common stock will not trigger the Rights unless they acquire additional common stock shares, subject to certain exceptions set forth in the Rights Plan. In addition, the Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Rights Plan if the Board determines that doing so would not limit or impair the availability of the NOLs or is otherwise in the best interests of the Company. |
Basis of Presentation and Sum28
Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Basis of Presentation and Summary of Significant Accounting Policies | |
Principles of Consolidation | Principles of Consolidation The Company’s condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. |
Use of Estimates | Use of Estimates The accompanying condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates pertain to proved oil and natural gas reserves and related cash flow estimates used in the depletion and impairment of proved oil and natural gas properties, the evaluation of unproved properties for impairment, the fair value of commodity derivative contracts, embedded derivatives and asset retirement obligations, accrued oil and natural gas revenues, capital expenditures and expenses and the allocation of general and administrative (“G&A”) expenses. Actual results could differ materially from those estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07 “Compensation - Stock Compensation (ASC 718) - Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of ASC 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. We are currently in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements. In August 2017, the FASB issued ASU 2017-12 “Derivatives and Hedging (ASC 815): Targeted Improvements to Accounting for Hedging Activities,” which changes the recognition and presentation requirements of hedge accounting, including eliminating the requirement to separately measure and report hedge ineffectiveness, and presenting all items that affect earnings in the same income statement line item as the hedged item. The ASU also provides new alternatives for applying hedge accounting. This ASU is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of adoption of this guidance on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-01 “Business Combinations (ASC 805): Clarifying the Definition of a Business,” which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is now effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018, using a prospective method; the clarified definition of a business will be applied by the Company to transactions executed subsequent to the effective date. In November 2016, the FASB issued ASU 2016-18 “Statement of Cash Flows (ASC 230): Restricted Cash,” which requires companies to include cash and cash equivalents that have restrictions on withdrawal or use in total cash and cash equivalents on the statement of cash flows. This ASU is now effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The adoption of ASU 2016-18 did not have an impact on the Company’s unaudited condensed consolidated statement of cash flows. In October 2016, the FASB issued ASU 2016-16 “Income Taxes (ASC 740): Intra-Entity Transfers of Assets Other Than Inventory,” which eliminates a current exception in U.S. GAAP to the recognition of the income tax effects of temporary differences that result from intra-entity transfers of non-inventory assets. The intra-entity exception is being eliminated under the ASU. The standard is required to be applied on a modified retrospective basis and is now effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. The adoption of ASU 2016-16 did not have an impact on the Company’s unaudited condensed consolidated financial statements and related disclosures. In August 2016, the FASB issued ASU 2016-15 “Statement of Cash Flows (ASC 230): Classification of Certain Cash Receipts and Cash Payments”. This ASU is intended to clarify the presentation of cash receipts and payments in specific situations. The amendments in this ASU are now effective for financial statements issued for annual periods beginning after December 15, 2017. The Company adopted this ASU on January 1, 2018, using a retrospective method. The adoption of ASU 2016-15 did not have an impact on the Company’s unaudited condensed consolidated statement of cash flows. In February 2016, the FASB issued ASU 2016-02 “Leases (ASC 842),” effective for annual and interim periods for public companies beginning after December 15, 2018, with a modified retrospective approach to be used for implementation. The standards update the previous lease guidance by requiring the recognition of a right-to-use asset and lease liability on the statement of financial position for all leases with lease terms of more than 12 months. The lease liability represents the discounted obligation to make future minimum lease payments and corresponding right-of-use asset on the balance sheet for most leases. Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. The Company has several operating leases as further discussed in Note 17, “Commitments and Contingencies,” which will be impacted by the new rules under this standard. The Company will not early adopt this standard, and will apply the revised lease rules for our interim and annual reporting periods starting January 1, 2019. The Company is currently evaluating the impact of these rules on its financial statements and has started the assessment process by evaluating the population of leases under the revised definition. The Company is also in the process of implementing a lease accounting software to properly account for lease data upon adoption. The adoption of this standard will result in an increase in the assets and liabilities on the Company’s condensed consolidated balance sheets. The quantitative impacts of the new standard are dependent on the active leases at the time of adoption. As a result, the evaluation of the effect of the new standards will extend over future periods. In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (ASC 606).” In March, April, May and December of 2016, the FASB issued rules clarifying several aspects of the new revenue recognition standard. The new guidance is effective for fiscal years and interim periods beginning after December 15, 2017. This guidance outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods and services. The new standard also requires more detailed disclosures related to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. See Note 18, “Revenue Recognition” for discussion of the Company’s adoption of the new standard. |
Change in Accounting Principle
Change in Accounting Principle (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Change from full cost method to successful efforts method | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Summary of change in accounting principle | The following table presents the effects of the change to the successful efforts method in the condensed consolidated balance sheet as of June 30, 2017 (in thousands): Changes to Condensed Consolidated Balance Sheet June 30, 2017 Under Full Cost Changes As Reported Under Successful Efforts Oil and natural gas properties: Proved oil and natural gas properties $ 4,186,528 $ (1,360,068) $ 2,826,460 Unproved oil and natural gas properties 477,863 (8,497) 469,366 Total oil and natural gas properties 4,664,391 (1,368,565) 3,295,826 Less: Accumulated depreciation, depletion, amortization and impairment (2,818,705) 1,423,768 (1,394,937) Total oil and natural gas properties, net 1,845,686 55,203 1,900,889 Other assets 41,604 (1,014) 40,590 Total assets $ 2,218,053 $ 54,189 $ 2,272,242 Current liabilities: Other current liabilities $ 79,362 $ 8,907 $ 88,269 Total current liabilities 272,861 8,907 281,768 Other liabilities 56,387 20,412 76,799 Total liabilities 2,256,191 29,319 2,285,510 Accumulated deficit (1,795,631) 24,870 (1,770,761) Total stockholders' deficit (447,323) 24,870 (422,453) Total liabilities and stockholders' deficit $ 2,218,053 $ 54,189 $ 2,272,242 The following table presents the effects of the change to the successful efforts method in the condensed consolidated statement of operations for the three and six months ended June 30, 2017 (in thousands, except per share amounts): Changes to the Condensed Consolidated Statement of Operations For the three months ended June 30, 2017 Under Full Cost Changes As Reported Under Successful Efforts Oil and natural gas production expenses $ 64,848 $ (2,228) $ 62,620 Exploration expenses — 4,446 4,446 Depreciation, depletion, amortization and accretion 50,851 (10,009) 40,842 Impairment of oil and natural gas properties — — — Gain on sale of oil and natural gas properties 7,133 (1,111) 6,022 Net income 46,309 6,679 52,988 Net income allocable to participating securities (1,893) (485) (2,378) Net income attributable to common stockholders $ 24,198 $ 6,193 $ 30,391 Net income per common share - basic $ 0.32 $ 0.08 $ 0.40 Net income per common share - diluted $ 0.31 $ 0.08 $ 0.39 Changes to the Condensed Consolidated Statement of Operations For the six months ended June 30, 2017 Under Full Cost Changes As Reported Under Successful Efforts Oil and natural gas production expenses $ 105,073 $ (4,453) $ 100,620 Exploration expenses — 4,797 4,797 Depreciation, depletion, amortization and accretion 84,057 (16,812) 67,245 Impairment of oil and natural gas properties — 1,845 1,845 Gain on sale of oil and natural gas properties 12,276 (1,910) 10,366 Net income 56,010 12,713 68,723 Net income allocable to participating securities (1,021) (953) (1,974) Net income attributable to common stockholders $ 12,608 $ 11,760 $ 24,368 Net income per common share - basic $ 0.17 $ 0.16 $ 0.33 Net income per common share - diluted $ 0.17 $ 0.16 $ 0.33 The following table presents the effects of the change to the successful efforts method in the condensed consolidated statement of cash flows for the six months ended June 30, 2017 (in thousands): Changes to the Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2017 Under Full Cost Change As Reported Under Successful Efforts Net income $ 56,010 $ 12,713 $ 68,723 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, amortization and accretion 84,057 (16,812) 67,245 Impairment of oil and natural gas properties — 1,845 1,845 Gain on sale of oil and natural gas properties (12,276) 1,910 (10,366) Amortization of deferred gain on Catarina Midstream Sale (7,407) (4,453) (11,860) Net cash provided by operating activities 64,558 (4,797) 59,761 Payments for oil and natural gas properties (217,680) 4,797 (212,883) Net cash used in investing activities (1,198,709) 4,797 (1,193,912) Net cash provided by financing activities 760,481 — 760,481 Decrease in cash and cash equivalents (373,670) — (373,670) Cash and cash equivalents, beginning of period 501,917 — 501,917 Cash and cash equivalents, end of period $ 128,247 $ — $ 128,247 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Acquisitions and Divestitures | |
Schedule of total purchase price allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition | The total purchase price was allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition as follows (in thousands): Proved oil and natural gas properties $ 781,789 Unproved properties 263,471 Other assets acquired 6,702 Fair value of assets acquired 1,051,962 Asset retirement obligations (8,289) Fair value of net assets acquired $ 1,043,673 |
Cash and Cash Equivalents (Tabl
Cash and Cash Equivalents (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Cash and Cash Equivalents | |
Schedule of cash and cash equivalents | As of June 30, 2018 and December 31, 2017, cash and cash equivalents consisted of the following (in thousands): June 30, December 31, 2018 2017 Cash $ 80,046 $ 135,363 Cash equivalents 357,643 49,071 Total cash and cash equivalents $ 437,689 $ 184,434 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt | |
Schedule of long-term debt | As of June 30, 2018 and December 31, 2017, the Company’s outstanding debt consisted of the following (in thousands): June 30, December 31, Interest Rate Original Maturity Date 2018 2017 Short-Term Debt SR Credit Agreement (1)(2) Variable August 8, 2018 $ 23,996 $ 23,996 Total short-term debt $ 23,996 $ 23,996 Long-Term Debt Credit Agreement Variable February 14, 2023 $ — $ 50,000 SN UnSub Credit Agreement (1) Variable March 1, 2022 167,500 175,500 7.75% Notes 7.75% June 15, 2021 600,000 600,000 4.59% Non-Recourse Subsidiary Term Loan (1) 4.59% August 31, 2022 3,990 4,164 6.125% Notes 6.125% January 15, 2023 1,150,000 1,150,000 7.25% Senior Secured Notes 7.25% February 15, 2023 500,000 — 2,421,490 1,979,664 Unamortized discount on Additional 7.75% Notes (2,674) (3,126) Unamortized premium on Additional 6.125% Notes 1,225 1,360 Unamortized discount on 7.25% Senior Secured Notes (4,755) — Unamortized debt issuance costs (50,537) (47,215) Total long-term debt $ 2,364,749 $ 1,930,683 (1) These debt instruments are Non-Recourse to the Company. Bears a weighted-average interest rate of 6.522% and 5.122% for the six months ended June 30, 2018 and one month ended December 31, 2017, respectively. |
Schedule of interest expense | The components of interest expense are as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Interest on SR Credit Agreement $ (480) $ — $ (828) $ — Interest and commitment fees on Credit Agreement (30) (562) (695) (940) Interest on SN UnSub Credit Agreement (2,202) (2,299) (4,503) (3,055) Interest on Senior Notes (38,297) (29,234) (71,861) (58,470) Interest on Non-Recourse Subsidiary Term Loan (47) — (94) — Amortization of debt issuance costs (3,118) (3,708) (9,832) (6,205) Amortization of discounts and premium on Senior Notes (416) (158) (697) (316) Total interest expense $ (44,590) $ (35,961) $ (88,510) $ (68,986) |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivatives Fair Value [Line Items] | |
Schedule of derivative positions | The following table presents derivative positions for the periods indicated as of June 30, 2018: July 1 - December 31, 2018 2019 2020 Oil positions: Fixed-for-floating price swaps (NYMEX WTI): Hedged volume (Bbls) 4,039,794 3,149,000 599,400 Average price ($/Bbl) $ 52.27 $ 51.91 $ 54.31 Call swaptions (NYMEX WTI): Option volume (Bbls) — 730,000 — Average price ($/Bbl) $ — $ 55.00 $ — Natural gas positions: Fixed-for-floating price swaps (NYMEX Henry Hub): Hedged volume (MMbtu) 34,957,648 17,644,000 3,862,500 Average price ($/MMbtu) $ 3.01 $ 2.90 $ 2.74 |
Schedule of reconciliation of changes in fair value of commodity derivatives | The following table sets forth a reconciliation of the changes in fair value of the Company’s embedded and earnout derivatives (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Beginning fair value of other derivatives $ (1,551) $ — Loss on embedded derivatives (6,053) (1,551) Initial fair value of earnout derivative 6,401 — Gain on earnout derivative 1,527 — Ending fair value of other derivatives $ 324 $ (1,551) |
Summary of balance sheet presentation of the Company's commodity derivatives | The following information summarizes the gross fair values of derivative instruments, presenting the impact of offsetting the derivative assets and liabilities on the Company’s condensed consolidated balance sheets (in thousands): June 30, 2018 Gross Amounts Net Amounts Gross Amount Offset in the Presented in the of Recognized Consolidated Consolidated Assets and Liabilities Balance Sheets Balance Sheets Offsetting Derivative Assets: Current asset $ 3,791 $ (550) $ 3,241 Long-term asset 9,148 (312) 8,836 Total asset $ 12,939 $ (862) $ 12,077 Offsetting Derivative Liabilities: Current liability $ 103,454 $ (550) $ 102,904 Long-term liability 31,444 (312) 31,132 Total liability $ 134,898 $ (862) $ 134,036 December 31, 2017 Gross Amounts Net Amounts Gross Amount Offset in the Presented in the of Recognized Consolidated Consolidated Assets Balance Sheets Balance Sheets Offsetting Derivative Assets: Current asset $ 16,510 $ (80) $ 16,430 Long-term asset 2,100 (672) 1,428 Total asset $ 18,610 $ (752) $ 17,858 Offsetting Derivative Liabilities: Current liability $ 56,270 $ (80) $ 56,190 Long-term liability 18,146 (672) 17,474 Total liability $ 74,416 $ (752) $ 73,664 |
Commodity derivatives | |
Derivatives Fair Value [Line Items] | |
Schedule of reconciliation of the changes in fair value of the Company's commodity derivatives | The following table sets forth a reconciliation of the changes in fair value of the Company’s commodity derivatives for the six months ended June 30, 2018 and the year ended December 31, 2017 (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Beginning fair value of commodity derivatives $ (54,255) $ (35,014) Net losses on crude oil derivatives (108,018) (48,966) Net gains (losses) on natural gas derivatives (6,099) 42,764 Net settlements paid (received) on commodity derivative contracts: Crude oil 51,996 (11,807) Natural gas (5,907) (1,232) Ending fair value of commodity derivatives $ (122,283) $ (54,255) |
Fair Value of Financial Instr34
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value of Financial Instruments | |
Schedule of financial assets and liabilities measured at fair value on a recurring basis | The following tables set forth, by level within the fair value hierarchy, the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2018 and December 31, 2017 (in thousands): As of June 30, 2018 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Cash equivalents $ 357,643 $ — $ — $ 357,643 Equity investment: Investment in SNMP 26,818 — — 26,818 Investment in Lonestar 12,660 — — 12,660 Oil derivative instruments: Swaps — (117,479) — (117,479) Call swaptions — (8,178) — (8,178) Gas derivative instruments: Swaps — 3,375 — 3,375 Other: Embedded derivative instruments — (7,604) — (7,604) Earnout derivative asset — — 7,928 7,928 Total $ 397,121 $ (129,886) $ 7,928 $ 275,163 As of December 31, 2017 Level 1 Level 2 Level 3 Total Cash and cash equivalents: Cash equivalents $ 49,071 $ — $ — $ 49,071 Equity investment: Investment in SNMP 25,227 — — 25,227 Investment in Lonestar 5,955 — — 5,955 Oil derivative instruments: Swaps — (66,204) — (66,204) Call swaptions — (3,431) — (3,431) Gas derivative instruments: Swaps — 15,380 — 15,380 Other: Embedded derivative instruments — (1,551) — (1,551) Total $ 80,253 $ (55,806) $ — $ 24,447 |
Reconciliation of changes in the fair value of derivative instruments classified as Level 3 in the fair value hierarchy | The following table sets forth a reconciliation of changes in the fair value of the Company’s earnout derivative instruments classified as Level 3 in the fair value hierarchy (in thousands): June 30, 2018 Beginning balance $ — Initial fair value of earnout derivative 6,401 Gain on earnout derivative 1,527 Ending balance $ 7,928 |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Asset Retirement Obligations | |
Schedule of changes in asset retirement obligation | The changes in the asset retirement obligation for the six months ended June 30, 2018 and the year ended December 31, 2017 were as follows (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Abandonment liability, beginning of period $ 36,098 $ 25,087 Liabilities incurred during period 1,018 4,968 Acquisitions — 8,289 Divestitures (158) (3,538) Revisions — (1,343) Accretion expense 1,541 2,635 Abandonment liability, end of period $ 38,499 $ 36,098 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Schedule of total purchase price allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition | The total purchase price was allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition as follows (in thousands): Proved oil and natural gas properties $ 781,789 Unproved properties 263,471 Other assets acquired 6,702 Fair value of assets acquired 1,051,962 Asset retirement obligations (8,289) Fair value of net assets acquired $ 1,043,673 |
SR | |
Schedule of total purchase price allocated to the assets purchased and liabilities assumed based upon their fair values on the date of acquisition | The assets and liabilities underlying the equity interests transferred to the Company were recorded at fair value on a preliminary basis as of the date of the transfer as follows (in thousands): Proved oil and natural gas properties $ 15,867 Unproved properties 7,482 Other assets acquired 2,739 Fair value of assets acquired 26,088 Asset retirement obligations (2,092) Fair value of net assets acquired $ 23,996 |
Accrued Liabilities and Other37
Accrued Liabilities and Other Current Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accrued Liabilities and Other Current Liabilities | |
Summary of accrued liabilities | The following information summarizes accrued liabilities on the condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Capital expenditures $ 93,506 $ 85,340 Other: General and administrative costs 8,440 8,855 Production taxes 5,444 5,084 Ad valorem taxes 7,721 84 Lease operating expenses 26,520 32,152 Interest payable 47,911 34,632 Other accrued liabilities — 3,987 Total accrued liabilities $ 189,542 $ 170,134 |
Summary of other payables | The following information summarizes other payables on the condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Revenue payable $ 83,705 $ 72,451 Production tax payable 3,881 2,774 Other 12,865 6,745 Total other payables $ 100,451 $ 81,970 |
Summary of other current liabilities | The following information summarizes other current liabilities on the condensed consolidated balance sheet as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Operated prepayment liability $ 41,636 $ 88,999 Deferred gain on Western Catarina Midstream Divestiture - short term 23,720 23,720 Phantom compensation payable - short term 5,751 2,525 Total other current liabilities $ 71,107 $ 115,244 |
Stockholders' and Mezzanine E38
Stockholders' and Mezzanine Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Stockholders' and Mezzanine Equity | |
Preferred Units accounted for as mezzanine equity | The SN UnSub Preferred Units issued in March 2017 are accounted for as mezzanine equity in the condensed consolidated balance sheet consisting of the following as of June 30, 2018 and December 31, 2017, respectively, (in thousands): Six Months Ended Year Ended June 30, December 31, 2018 2017 Mezzanine equity beginning balance $ 427,512 $ — Private placement of SN UnSub Preferred Units — 500,000 Discount — (90,527) Accretion of Discount 12,119 18,039 Dividends accrued (1) 25,000 41,667 Dividends prepaid (2) (2,592) — Dividends/distributions paid (3) (9,908) (41,667) Total mezzanine equity $ 452,131 $ 427,512 (1) In accordance with the Partnership Agreement and SN UnSub Credit Agreement, cash distributions for the 10% dividend on the SN UnSub Preferred Units were prohibited through February 28, 2018, and thus, the dividends for the year ended December 31, 2017 were deemed to have been accrued and offset by the tax distributions paid. The dividends for the first and second quarters of 2018 were accrued and paid in cash on March 30, 2018 and July 2, 2018, respectively. (2) In 2017, tax distributions of approximately $2.6 million were paid in excess of the accrued dividend. The excess distribution was offset against a portion of the dividend accrued and paid during the three months ended March 31, 2018. Distributions paid in 2017 represent tax distributions from available cash to holders of the SN UnSub Preferred Units. The Partnership Agreement provides that tax distributions shall be treated as advances of and shall be offset against any amounts holders of the SN UnSub Preferred Units are entitled to receive. |
Schedule of computation of basic and diluted net income (loss) per share | The following table shows the computation of basic and diluted net income (loss) per share for the three and six months ended June 30, 2018 and 2017 (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Net income (loss) $ (34,987) $ 52,988 $ (39,804) $ 68,723 Less: Preferred stock dividends (3,987) (3,987) (7,974) (7,974) Preferred unit dividends and distributions (12,500) (10,950) (22,408) (27,415) Preferred unit amortization (6,189) (5,282) (12,119) (6,992) Net income (loss) allocable to participating securities (1)(2) — (2,378) — (1,974) Net income (loss) attributable to common stockholders $ (57,663) $ 30,391 $ (82,305) $ 24,368 Weighted average number of unrestricted outstanding common shares used to calculate basic net income (loss) per share 81,787 76,395 81,356 73,045 Dilutive shares (3)(4)(5) — 12,620 — 100 Denominator for diluted earnings (loss) per common share 81,787 89,015 81,356 73,145 Net income (loss) per common share - basic $ (0.71) $ 0.40 $ (1.01) $ 0.33 Net income (loss) per common share - diluted $ (0.71) $ 0.39 $ (1.01) $ 0.33 (1) The Company’s restricted shares of common stock are participating securities. (2) For the three and six months ended June 30, 2018, no losses were allocated to participating restricted stock because such securities do not have a contractual obligation to share in the Company’s losses. (3) The three months ended June 30, 2017 excludes 942,841 shares of weighted average restricted stock from the calculation of the denominator for diluted loss per common share as these shares were anti-dilutive. (4) The six months ended June 30, 2017 excludes 1,304,160 shares of weighted average restricted stock and 12,520,179 shares of common stock resulting from an assumed conversion of the Company's Series A Preferred Stock and Series B Preferred Stock from the calculation of the denominator for diluted loss per common share as these shares were anti-dilutive. The three and six months ended June 30, 2018 excludes 2,484,202 and 756,417 shares, respectively, of weighted average restricted stock and 12,520,179 shares of common stock resulting from an assumed conversion of the Company's Series A Preferred Stock and Series B Preferred Stock from the calculation of the denominator for diluted loss per common share as these shares were anti-dilutive. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Performance-based phantom stock awards granted | Cash-Settled Stock-Settled Target Performance-Based Phantom Shares Chief Executive Officer 506,230 506,230 Executive Chairman of the Board 506,230 506,230 Executive Vice President and Chief Financial Officer 186,916 186,916 Executive Vice President 253,115 253,115 Senior Vice President and Chief Operating Officer 186,916 186,916 |
Schedule of stock-based compensation expense | The Company recognized the following stock-based compensation expense (in thousands) which is included in general and administrative expense in the condensed consolidated statements of operations: Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Restricted stock awards, directors $ 330 $ 619 $ 627 $ 4,601 Restricted stock awards, non-employees 3,023 2,982 2,819 10,548 Performance awards 1,298 734 830 1,277 Phantom stock awards 5,017 3,024 4,119 13,965 Total stock-based compensation expense $ 9,668 $ 7,359 $ 8,395 $ 30,391 |
Restricted shares and PARS | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Summary of the status of the non-vested shares | A summary of the activity of the non-vested restricted shares and PARS for the three and six months ended June 30, 2018 and 2017 is presented below (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Non-vested common stock, beginning of period 3,684 6,336 4,897 6,891 Granted 2,676 282 3,156 2,076 Vested (542) (711) (2,159) (3,060) Forfeited (51) (47) (127) (47) Non-vested common stock, end of period 5,767 5,860 5,767 5,860 |
Phantom Stock shares and PAPS | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Summary of the status of the non-vested shares | A summary of the activity of the non‑vested Phantom Stock shares and PAPS for the three and six months ended June 30, 2018 and 2017 is presented below (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Non-vested phantom stock and PAPS, beginning of period 3,949 4,690 3,589 4,012 Granted 2,474 191 3,652 1,986 Vested (435) (663) (1,150) (1,780) Forfeited (100) (20) (203) (20) Non-vested phantom stock and PAPS, end of period 5,888 4,198 5,888 4,198 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Reconciliation of balance sheet | In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated balance sheet is as follows (in thousands): As of June 30, 2018 Balances without Effect of change Balance Sheet Adoption ASC 606 higher/(lower) As Reported Assets Fair value of derivative instruments $ 2,979 $ 262 $ 3,241 Total current assets 561,737 262 561,999 Fair value of derivative instruments 1,170 7,666 8,836 Total assets $ 2,896,486 $ 7,928 $ 2,904,414 Liabilities Other liabilities $ 50,670 $ (16,338) $ 34,332 Total liabilities 2,988,496 (16,338) 2,972,158 Equity Accumulated deficit (1,915,986) 24,266 (1,891,720) Total stockholders' deficit (544,141) 24,266 (519,875) Total liabilities and stockholders' deficit $ 2,896,486 $ 7,928 $ 2,904,414 |
Reconciliation of income statement | In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our condensed consolidated statement of operations for the three and six months ended June 30, 2018 is as follows (in thousands): Three Months Ended June 30, 2018 Balances without Effect of change Adoption ASC 606 higher/(lower) As Reported Statement of Operations Other income (expense) $ 5,461 $ 1,254 $ 6,715 Total other income (expense) (106,117) 1,254 (104,863) Income (loss) before income taxes (36,241) 1,254 (34,987) Net income (loss) $ (36,241) $ 1,254 $ (34,987) Six Months Ended June 30, 2018 Balances without Effect of change Adoption ASC 606 higher/(lower) As Reported Statement of Operations Other income (expense) $ 8,616 $ 1,527 $ 10,143 Total other income (expense) (190,194) 1,527 (188,667) Income (loss) before income taxes (41,331) 1,527 (39,804) Net income (loss) $ (41,331) $ 1,527 $ (39,804) |
Accounting Standards Update 2014-09 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Cumulative effect of changes for adoption of ASC 606 | The cumulative effect of the changes made to our consolidated January 1, 2018 condensed consolidated balance sheet for the adoption of ASC 606 were as follows (in thousands): As of Adjustments Due As of Balance Sheet December 31, 2017 to ASC 606 January 1, 2018 Assets Fair value of derivative instruments $ 16,430 $ 150 $ 16,580 Total current assets 350,798 150 350,948 Fair value of derivative instruments 1,428 6,251 7,679 Total assets $ 2,470,635 $ 6,401 $ 2,477,036 Liabilities Other liabilities $ 65,480 $ (16,338) $ 49,142 Total liabilities 2,512,263 (16,338) 2,495,925 Equity Accumulated deficit (1,832,156) 22,739 (1,809,417) Total stockholders' deficit (469,140) 22,739 (446,401) Total liabilities and stockholders' deficit $ 2,470,635 $ 6,401 $ 2,477,036 |
Condensed Consolidating Finan41
Condensed Consolidating Financial Information (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Condensed Consolidating Financial Information | |
Condensed balance sheets | A summary of the condensed consolidated guarantor balance sheets as of June 30, 2018 and December 31, 2017 is presented below (in thousands): June 30, 2018 Assets Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total current assets $ 633,669 $ 112,281 $ 125,872 $ (309,823) $ 561,999 Total oil and natural gas properties, net 121,408 1,345,142 767,398 — 2,233,948 Investment in subsidiaries 1,247,762 — (7,279) (1,240,483) — Other assets 11,824 9,825 86,818 — 108,467 Total Assets $ 2,014,663 $ 1,467,248 $ 972,809 $ (1,550,306) $ 2,904,414 Liabilities and Shareholders' Equity Current liabilities $ 199,403 $ 348,978 $ 264,888 $ (309,823) $ 503,446 Long-term liabilities 2,214,683 58,526 195,503 — 2,468,712 Mezzanine equity — — 452,131 — 452,131 Total shareholders' equity (deficit) (399,423) 1,059,744 60,287 (1,240,483) (519,875) Total Liabilities and Shareholders' Equity (deficit) $ 2,014,663 $ 1,467,248 $ 972,809 $ (1,550,306) $ 2,904,414 December 31, 2017 Assets Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total current assets $ 447,984 $ 98,758 $ 117,031 $ (312,975) $ 350,798 Total oil and natural gas properties, net 3,987 1,275,153 748,319 — 2,027,459 Investment in subsidiaries 1,081,692 — (7,280) (1,074,412) — Other assets 25,451 4,415 62,512 — 92,378 Total Assets $ 1,559,114 $ 1,378,326 $ 920,582 $ (1,387,387) $ 2,470,635 Liabilities and Shareholders' Equity Current liabilities $ 212,026 $ 312,531 $ 250,946 $ (312,975) $ 462,528 Long-term liabilities 1,827,072 26,787 195,876 — 2,049,735 Mezzanine equity — — 427,512 — 427,512 Total shareholders' equity (deficit) (479,984) 1,039,008 46,248 (1,074,412) (469,140) Total Liabilities and Shareholders' Equity (deficit) $ 1,559,114 $ 1,378,326 $ 920,582 $ (1,387,387) $ 2,470,635 |
Condensed statements of operations | A summary of the condensed consolidated guarantor statements of operations for the three and six months ended June 30, 2018 and 2017 is presented below (in thousands): Three Months Ended June 30, 2018 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 178,842 $ 80,472 $ — $ 259,314 Total operating costs and expenses (24,721) (125,167) (39,684) 134 (189,438) Other income (81,192) (5,766) (17,771) (134) (104,863) Income (loss) before income taxes (105,913) 47,909 23,017 — (34,987) Income tax benefit — — — — — Equity in income (loss) of subsidiaries 70,926 — — (70,926) — Net income (loss) $ (34,987) $ 47,909 $ 23,017 $ (70,926) $ (34,987) Three Months Ended June 30, 2017 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 111,302 $ 64,402 $ — $ 175,704 Total operating costs and expenses (22,154) (70,345) (53,921) — (146,420) Other income 7,856 5,278 10,315 — 23,449 Income (loss) before income taxes (14,298) 46,235 20,796 — 52,733 Income tax benefit 18 237 — — 255 Equity in income (loss) of subsidiaries 67,268 — — (67,268) — Net income (loss) $ 52,988 $ 46,472 $ 20,796 $ (67,268) $ 52,988 Six Months Ended June 30, 2018 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 346,328 $ 164,212 $ — $ 510,540 Total operating costs and expenses (40,252) (207,833) (113,862) 270 (361,677) Other income (expense) (147,959) (5,263) (35,175) (270) (188,667) Income (loss) before income taxes (188,211) 133,232 15,175 — (39,804) Income tax benefit (expense) — — — — — Equity in income (loss) of subsidiaries 148,407 — — (148,407) — Net income (loss) $ (39,804) $ 133,232 $ 15,175 $ (148,407) $ (39,804) Six Months Ended June 30, 2017 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Total revenues $ — $ 223,130 $ 86,416 $ — $ 309,546 Total operating costs and expenses (86,727) (124,950) (75,832) 501 (287,008) Other income (expense) (3,378) 10,393 38,463 (501) 44,977 Income (loss) before income taxes (90,105) 108,573 49,047 — 67,515 Income tax benefit (expense) 1,208 — — — 1,208 Equity in income (loss) of subsidiaries 157,620 — — (157,620) — Net income (loss) $ 68,723 $ 108,573 $ 49,047 $ (157,620) $ 68,723 |
Condensed cash flows statements | A summary of the condensed consolidated guarantor statements of cash flows for the six months ended June 30, 2018 and 2017 is presented below (in thousands): Six Months Ended June 30, 2018 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Net cash provided by (used in) operating activities $ (107,425) $ 206,878 $ 55,841 $ — $ 155,294 Net cash provided by (used in) investing activities (49,514) (251,777) (53,336) 47,669 (306,958) Net cash provided by (used in) financing activities 423,387 15,853 13,348 (47,669) 404,919 Net increase (decrease) in cash and cash equivalents 266,448 (29,046) 15,853 — 253,255 Cash and cash equivalents, beginning of period 86,937 29,046 68,451 — 184,434 Cash and cash equivalents, end of period $ 353,385 $ — $ 84,304 $ — $ 437,689 Six Months Ended June 30, 2017 Parent Company Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries Eliminations Consolidated Net cash provided by (used in) operating activities $ (137,380) $ 173,301 $ 23,840 $ — $ 59,761 Net cash provided by (used in) investing activities (251,400) (419,849) (758,933) 236,270 (1,193,912) Net cash provided by (used in) financing activities 108,675 246,548 641,528 (236,270) 760,481 Net increase (decrease) in cash and cash equivalents (280,105) — (93,565) — (373,670) Cash and cash equivalents, beginning of period 343,941 157,976 — 501,917 Cash and cash equivalents, end of period $ 63,836 $ — $ 64,411 $ — $ 128,247 |
Variable Interest Entities (Tab
Variable Interest Entities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Variable Interest Entities | |
Schedule of carrying amounts of assets and liabilities of VIE | Below is a tabular comparison of the carrying amounts of the assets and liabilities of the VIE and the Company’s maximum exposure to loss as of June 30, 2018 and December 31, 2017 (in thousands): June 30, December 31, 2018 2017 Beginning Balance $ 32,507 $ 39,656 Initial investment in GRHL — 7,280 Distributions from equity investments — (311) Gain (loss) from change in fair value of investment in SNMP 1,591 (1,591) Sale of investments — (12,527) Maximum exposure to loss $ 34,098 $ 32,507 |
Organization (Details)
Organization (Details) - Tuscaloosa Marine Shale | Jun. 30, 2018a |
Area under agreement, gross (in acres) | 485,000 |
Area under agreement, net (in acres) | 283,000 |
Change in Accounting Principl44
Change in Accounting Principle - Balance Sheet (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
Oil and natural gas properties | ||||
Proved oil and natural gas properties | $ 3,418,554 | $ 3,130,407 | $ 2,826,460 | |
Unproved oil and natural gas properties | 434,244 | 398,605 | 469,366 | |
Total oil and natural gas properties | 3,852,798 | 3,529,012 | 3,295,826 | |
Less: Accumulated depreciation, depletion, amortization and impairment | (1,618,850) | (1,501,553) | (1,394,937) | |
Total oil and natural gas properties, net | 2,233,948 | 2,027,459 | 1,900,889 | |
Other assets | 52,873 | 52,488 | 40,590 | |
Total assets | 2,904,414 | $ 2,477,036 | 2,470,635 | 2,272,242 |
Current liabilities: | ||||
Other current liabilities | 71,107 | 115,244 | 88,269 | |
Total current liabilities | 503,446 | 462,528 | 281,768 | |
Other liabilities | 34,332 | 49,142 | 65,480 | 76,799 |
Total liabilities | 2,972,158 | 2,495,925 | 2,512,263 | 2,285,510 |
Accumulated deficit | (1,891,720) | (1,809,417) | (1,832,156) | (1,770,761) |
Total stockholders' deficit | (519,875) | (446,401) | (469,140) | (422,453) |
Total liabilities and stockholders' deficit | $ 2,904,414 | $ 2,477,036 | $ 2,470,635 | 2,272,242 |
Under Full Cost | ||||
Oil and natural gas properties | ||||
Proved oil and natural gas properties | 4,186,528 | |||
Unproved oil and natural gas properties | 477,863 | |||
Total oil and natural gas properties | 4,664,391 | |||
Less: Accumulated depreciation, depletion, amortization and impairment | (2,818,705) | |||
Total oil and natural gas properties, net | 1,845,686 | |||
Other assets | 41,604 | |||
Total assets | 2,218,053 | |||
Current liabilities: | ||||
Other current liabilities | 79,362 | |||
Total current liabilities | 272,861 | |||
Other liabilities | 56,387 | |||
Total liabilities | 2,256,191 | |||
Accumulated deficit | (1,795,631) | |||
Total stockholders' deficit | (447,323) | |||
Total liabilities and stockholders' deficit | 2,218,053 | |||
Changes | ||||
Oil and natural gas properties | ||||
Proved oil and natural gas properties | (1,360,068) | |||
Unproved oil and natural gas properties | (8,497) | |||
Total oil and natural gas properties | (1,368,565) | |||
Less: Accumulated depreciation, depletion, amortization and impairment | 1,423,768 | |||
Total oil and natural gas properties, net | 55,203 | |||
Other assets | (1,014) | |||
Total assets | 54,189 | |||
Current liabilities: | ||||
Other current liabilities | 8,907 | |||
Total current liabilities | 8,907 | |||
Other liabilities | 20,412 | |||
Total liabilities | 29,319 | |||
Accumulated deficit | 24,870 | |||
Total stockholders' deficit | 24,870 | |||
Total liabilities and stockholders' deficit | $ 54,189 |
Change in Accounting Principl45
Change in Accounting Principle - Statement of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
New accounting pronouncement | ||||
Oil and natural gas production expenses | $ 77,644 | $ 62,620 | $ 149,592 | $ 100,620 |
Exploration expenses | 516 | 4,446 | 549 | 4,797 |
Depreciation, depletion, amortization and accretion | 62,323 | 40,842 | 121,571 | 67,245 |
Impairment of oil and natural gas properties | 194 | 1,142 | 1,845 | |
Gain on sale of oil and natural gas properties | 6,022 | 10,366 | ||
Net income (loss) | (34,987) | 52,988 | (39,804) | 68,723 |
Net income allocable to participating securities | (2,378) | (1,974) | ||
Net income (loss) attributable to common stockholders | $ (57,663) | $ 30,391 | $ (82,305) | $ 24,368 |
Net income (loss) per common share - basic (in dollars per share) | $ (0.71) | $ 0.40 | $ (1.01) | $ 0.33 |
Net income (loss) per common share - diluted (in dollars per share) | $ (0.71) | $ 0.39 | $ (1.01) | $ 0.33 |
Under Full Cost | ||||
New accounting pronouncement | ||||
Oil and natural gas production expenses | $ 64,848 | $ 105,073 | ||
Depreciation, depletion, amortization and accretion | 50,851 | 84,057 | ||
Gain on sale of oil and natural gas properties | 7,133 | 12,276 | ||
Net income (loss) | 46,309 | 56,010 | ||
Net income allocable to participating securities | (1,893) | (1,021) | ||
Net income (loss) attributable to common stockholders | $ 24,198 | $ 12,608 | ||
Net income (loss) per common share - basic (in dollars per share) | $ 0.32 | $ 0.17 | ||
Net income (loss) per common share - diluted (in dollars per share) | $ 0.31 | $ 0.17 | ||
Changes | ||||
New accounting pronouncement | ||||
Oil and natural gas production expenses | $ (2,228) | $ (4,453) | ||
Exploration expenses | 4,446 | 4,797 | ||
Depreciation, depletion, amortization and accretion | (10,009) | (16,812) | ||
Impairment of oil and natural gas properties | 1,845 | |||
Gain on sale of oil and natural gas properties | (1,111) | (1,910) | ||
Net income (loss) | 6,679 | 12,713 | ||
Net income allocable to participating securities | (485) | (953) | ||
Net income (loss) attributable to common stockholders | $ 6,193 | $ 11,760 | ||
Net income (loss) per common share - basic (in dollars per share) | $ 0.08 | $ 0.16 | ||
Net income (loss) per common share - diluted (in dollars per share) | $ 0.08 | $ 0.16 |
Change in Accounting Principl46
Change in Accounting Principle - Statement of Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
New accounting pronouncement | ||||
Net income (loss) | $ (39,804) | $ 68,723 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation, depletion, amortization and accretion | $ 62,323 | $ 40,842 | 121,571 | 67,245 |
Impairment of oil and natural gas properties | 194 | 1,142 | 1,845 | |
Gain on sale of oil and natural gas properties | (1,528) | (6,022) | (1,528) | (10,366) |
Amortization of deferred gain on Catarina Midstream Sale | (11,860) | |||
Net cash provided by operating activities | 155,294 | 59,761 | ||
Payments for oil and natural gas properties | (307,665) | (212,883) | ||
Net cash used in investing activities | (306,958) | (1,193,912) | ||
Net cash provided by financing activities | 404,919 | 760,481 | ||
Increase (decrease) in cash and cash equivalents | 253,255 | (373,670) | ||
Cash and cash equivalents, beginning of period | 184,434 | 501,917 | ||
Cash and cash equivalents, end of period | $ 437,689 | 128,247 | $ 437,689 | 128,247 |
Under Full Cost | ||||
New accounting pronouncement | ||||
Net income (loss) | 56,010 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation, depletion, amortization and accretion | 50,851 | 84,057 | ||
Gain on sale of oil and natural gas properties | (12,276) | |||
Amortization of deferred gain on Catarina Midstream Sale | (7,407) | |||
Net cash provided by operating activities | 64,558 | |||
Payments for oil and natural gas properties | (217,680) | |||
Net cash used in investing activities | (1,198,709) | |||
Net cash provided by financing activities | 760,481 | |||
Increase (decrease) in cash and cash equivalents | (373,670) | |||
Cash and cash equivalents, beginning of period | 501,917 | |||
Cash and cash equivalents, end of period | 128,247 | 128,247 | ||
Changes | ||||
New accounting pronouncement | ||||
Net income (loss) | 12,713 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation, depletion, amortization and accretion | $ (10,009) | (16,812) | ||
Impairment of oil and natural gas properties | 1,845 | |||
Gain on sale of oil and natural gas properties | 1,910 | |||
Amortization of deferred gain on Catarina Midstream Sale | (4,453) | |||
Net cash provided by operating activities | (4,797) | |||
Payments for oil and natural gas properties | 4,797 | |||
Net cash used in investing activities | $ 4,797 |
Acquisitions and Divestitures47
Acquisitions and Divestitures (Details) - The "Comanche Assets" $ in Thousands | Mar. 01, 2017USD ($)asubsidiary | Jul. 01, 2016USD ($) |
Acquisitions | ||
Gross acres | a | 318,000 | |
Net acres | a | 155,000 | |
Fair value of net assets acquired | $ 2,100,000 | $ 1,043,673 |
Ownership interest acquired (as a percentage) | 49.00% | |
Total purchase price allocated to assets purchased and liabilities assumed | ||
Proved oil and natural gas properties | 781,789 | |
Unproved properties | 263,471 | |
Other assets acquired | 6,702 | |
Fair value of assets acquired | 1,051,962 | |
Asset retirement obligations | (8,289) | |
Fair value of net assets acquired | $ 2,100,000 | $ 1,043,673 |
SN EF UnSub, LP (“SN UnSub”) and SN EF Maverick, LLC (“SN Maverick”) | ||
Acquisitions | ||
Number of subsidiaries | subsidiary | 2 | |
Ownership interest acquired (as a percentage) | 24.50% | |
SN EF UnSub, LP (“SN UnSub”) | ||
Acquisitions | ||
Purchase price percentage | 37.00% | |
Cash contribution | $ 100,000 | |
Estimated total proved developed producing reserves (in percent) | 50.00% | |
Estimated total proved developed non-producing reserves (in percent) | 20.00% | |
Total proved undeveloped reserves (in percent) | 20.00% | |
SN EF Maverick, LLC (“SN Maverick”) | ||
Acquisitions | ||
Purchase price percentage | 13.00% | |
Estimated total proved developed producing reserves (in percent) | 0.00% | |
Estimated total proved developed non-producing reserves (in percent) | 30.00% | |
Total proved undeveloped reserves (in percent) | 30.00% | |
Gavilan | ||
Acquisitions | ||
Purchase price percentage | 50.00% | |
Total proved undeveloped reserves (in percent) | 50.00% | |
Eagle Ford Shale | ||
Acquisitions | ||
Gross acres | a | 252,000 | |
Net acres | a | 122,000 | |
Eagle Ford Shale | Gavilan | ||
Acquisitions | ||
Ownership interest acquired (as a percentage) | 24.50% | |
Pearsall Shale | ||
Acquisitions | ||
Gross acres | a | 66,000 | |
Net acres | a | 33,000 |
Acquisitions and Divestitures48
Acquisitions and Divestitures (Disposition) (Details) | Sep. 19, 2017USD ($)a | Jun. 15, 2017USD ($)aMMBoeBoeitemshares | Jun. 14, 2017USD ($) | Dec. 14, 2016USD ($) | Nov. 22, 2016USD ($) | Jul. 05, 2016USD ($) | Jun. 01, 2016aMMBoeBoeitem | Jun. 30, 2018USD ($)a$ / sharesshares | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Jun. 30, 2018USD ($)aClosing$ / sharesshares | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | Mar. 01, 2017a |
Divestitures | ||||||||||||||
Gain (reduction) on disposition | $ 1,528,000 | $ 6,022,000 | $ 1,528,000 | $ 10,366,000 | ||||||||||
Preferred Units issued ( in shares) | $ 500,000,000 | |||||||||||||
Javelina Disposition | ||||||||||||||
Divestitures | ||||||||||||||
Consideration | $ 105,000,000 | |||||||||||||
Undeveloped net acres | a | 68,000 | |||||||||||||
Gain (losses) on disposal | $ 73,700,000 | |||||||||||||
Marquis Disposition | Lonestar | ||||||||||||||
Divestitures | ||||||||||||||
Consideration | $ 44,000,000 | |||||||||||||
Net acres | a | 21,000 | |||||||||||||
Net proved reserves | MMBoe | 2.7 | |||||||||||||
Reserves developed (as a percentage) | 100.00% | |||||||||||||
Net proved reserves per day | Boe | 1,750 | |||||||||||||
Number of wells, gross | item | 104 | |||||||||||||
Number of wells, net | item | 65 | |||||||||||||
Marquis Disposition | Class A Common Stock | Lonestar | ||||||||||||||
Divestitures | ||||||||||||||
Consideration in stock (in shares) | shares | 1,500,000 | |||||||||||||
Marquis Disposition | Series B Convertible Preferred Stock | Lonestar | ||||||||||||||
Divestitures | ||||||||||||||
Consideration in stock (in shares) | shares | 6,000,000 | |||||||||||||
SOII Facility Disposition | Targa | ||||||||||||||
Divestitures | ||||||||||||||
Consideration | $ 12,500,000 | |||||||||||||
Percentage of working interest | 10.00% | |||||||||||||
Carnero Processing, LLC | Targa | ||||||||||||||
Divestitures | ||||||||||||||
Consideration | $ 55,500,000 | |||||||||||||
Assumption of capital commitments | $ 24,500,000 | |||||||||||||
Carnero Gathering, LLC | ||||||||||||||
Divestitures | ||||||||||||||
Gross acres | a | 315,000 | 315,000 | ||||||||||||
SN Cotulla Assets, LLC | Carrizo LLC | ||||||||||||||
Divestitures | ||||||||||||||
Consideration | $ 153,500,000 | |||||||||||||
Number of additional sale closings | Closing | 2 | |||||||||||||
Consideration | $ 167,400,000 | |||||||||||||
Net acres | a | 15,000 | |||||||||||||
Net proved reserves | MMBoe | 6.9 | |||||||||||||
Reserves developed (as a percentage) | 90.00% | |||||||||||||
Net proved reserves per day | Boe | 3,000 | |||||||||||||
Number of wells, gross | item | 112 | |||||||||||||
Number of wells, net | item | 93 | |||||||||||||
Gain (reduction) on disposition | $ 85,300,000 | $ 6,000,000 | $ 4,300,000 | |||||||||||
SNMP | Carnero Gathering, LLC | ||||||||||||||
Divestitures | ||||||||||||||
Consideration | $ 37,000,000 | |||||||||||||
Assumption of capital commitments | $ 7,400,000 | |||||||||||||
The "Comanche Assets" | ||||||||||||||
Divestitures | ||||||||||||||
Gross acres | a | 318,000 | |||||||||||||
Net acres | a | 155,000 | |||||||||||||
The "Comanche Assets" | GSO Capital Partners LP | ||||||||||||||
Divestitures | ||||||||||||||
Number of shares issued (in shares) | shares | 1,455,000 | |||||||||||||
Issuance of warrants | shares | 1,940,000 | 1,940,000 | ||||||||||||
Issuance of warrants (in dollars per share) | $ / shares | $ 10 | $ 10 | ||||||||||||
The "Comanche Assets" | Intrepid Private Equity V-A, LLC | ||||||||||||||
Divestitures | ||||||||||||||
Number of shares issued (in shares) | shares | 45,000 | |||||||||||||
Issuance of warrants | shares | 60,000 | 60,000 | ||||||||||||
Issuance of warrants (in dollars per share) | $ / shares | $ 10 | $ 10 | ||||||||||||
The "Comanche Assets" | SN UnSub Preferred Units | GSO Capital Partners LP | ||||||||||||||
Divestitures | ||||||||||||||
Preferred Units issued ( in shares) | $ 485,000 | |||||||||||||
Preferred Units issued | 485,000,000 | |||||||||||||
The "Comanche Assets" | SN UnSub Preferred Units | Intrepid Private Equity V-A, LLC | ||||||||||||||
Divestitures | ||||||||||||||
Preferred Units issued ( in shares) | 15,000 | |||||||||||||
Preferred Units issued | $ 15,000,000 |
Cash and Cash Equivalents (Deta
Cash and Cash Equivalents (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 |
Cash and cash equivalents | ||||
Total cash and cash equivalents | $ 437,689 | $ 184,434 | $ 128,247 | $ 501,917 |
Cash | ||||
Cash and cash equivalents | ||||
Total cash and cash equivalents | 80,046 | 135,363 | ||
Money market funds | ||||
Cash and cash equivalents | ||||
Total cash and cash equivalents | $ 357,643 | $ 49,071 |
Oil and Natural Gas Properties
Oil and Natural Gas Properties (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | |
Oil and Natural Gas Properties | |||
Impairment of oil and natural gas properties | $ 194 | $ 1,142 | $ 1,845 |
Debt (Summary) (Details)
Debt (Summary) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Feb. 27, 2015 | Sep. 12, 2014 | Jul. 18, 2014 | Jun. 27, 2014 | Sep. 18, 2013 | Jun. 13, 2013 |
Long-Term Debt | ||||||||
Short term debt | $ 23,996 | $ 23,996 | ||||||
Long term debt before unamortized discount | 2,421,490 | 1,979,664 | ||||||
Unamortized debt issuance costs | (50,537) | (47,215) | ||||||
Total long-term debt | $ 2,364,749 | 1,930,683 | ||||||
7.75% Notes | ||||||||
Long-Term Debt | ||||||||
Face value of debt | $ 600,000 | $ 200,000 | $ 400,000 | |||||
Interest rate (as a percent) | 7.75% | 7.75% | ||||||
Long term debt before unamortized discount | $ 600,000 | 600,000 | ||||||
Unamortized discount on Additional Notes | $ (2,674) | (3,126) | ||||||
4.59% Non-Recourse Subsidiary Term Loan | ||||||||
Long-Term Debt | ||||||||
Interest rate (as a percent) | 4.59% | |||||||
Long term debt before unamortized discount | $ 3,990 | 4,164 | ||||||
6.125% Notes | ||||||||
Long-Term Debt | ||||||||
Face value of debt | $ 1,150,000 | $ 300,000 | $ 850,000 | |||||
Interest rate (as a percent) | 6.125% | 6.125% | ||||||
Long term debt before unamortized discount | $ 1,150,000 | 1,150,000 | ||||||
Unamortized premium on Additional 6.125% Notes | $ 1,225 | 1,360 | $ 2,300 | |||||
7.25% Senior Secured Notes | ||||||||
Long-Term Debt | ||||||||
Interest rate (as a percent) | 7.25% | |||||||
Long term debt before unamortized discount | $ 500,000 | |||||||
Unamortized discount on Additional Notes | (4,755) | |||||||
Second Amended And Restated Credit Agreement | ||||||||
Long-Term Debt | ||||||||
Long term debt before unamortized discount | 50,000 | |||||||
SN UnSub Credit Agreement | ||||||||
Long-Term Debt | ||||||||
Long term debt before unamortized discount | 167,500 | 175,500 | ||||||
SR Credit Agreement | ||||||||
Long-Term Debt | ||||||||
Short term debt | $ 23,996 | $ 23,996 | ||||||
Weighted average interest rate | 6.522% | 5.122% |
Debt (Interest Expense Componen
Debt (Interest Expense Components) (Details) - USD ($) $ in Thousands | Sep. 12, 2014 | Sep. 18, 2013 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 |
Interest expense | ||||||
Amortization of debt issuance costs | $ (3,118) | $ (3,708) | $ (9,832) | $ (6,205) | ||
Amortization of (discount) premium | (697) | (316) | ||||
Total interest expense | (44,590) | (35,961) | (88,510) | (68,986) | ||
4.59% Non-Recourse Subsidiary Term Loan | ||||||
Interest expense | ||||||
Interest | (47) | (94) | ||||
Senior Notes | ||||||
Interest expense | ||||||
Interest | (38,297) | (29,234) | (71,861) | (58,470) | ||
7.75% Notes | ||||||
Interest expense | ||||||
Amortization of debt issuance costs | $ (4,200) | |||||
Amortization of (discount) premium | (416) | (158) | (697) | (316) | ||
6.125% Notes | ||||||
Interest expense | ||||||
Amortization of debt issuance costs | $ (6,400) | |||||
Second Amended And Restated Credit Agreement | ||||||
Interest expense | ||||||
Interest | (30) | (562) | (695) | (940) | ||
SN UnSub Credit Agreement | ||||||
Interest expense | ||||||
Interest | (2,202) | $ (2,299) | (4,503) | $ (3,055) | ||
SR Credit Agreement | ||||||
Interest expense | ||||||
Interest | $ (480) | $ (828) |
Debt (Detail)
Debt (Detail) $ in Thousands | Sep. 30, 2017subsidiary | Mar. 01, 2017USD ($) | Sep. 12, 2014USD ($) | Jun. 27, 2014USD ($)a | Sep. 18, 2013USD ($) | Jun. 13, 2013USD ($) | Jun. 30, 2018USD ($)a | Jun. 30, 2017USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2013USD ($) | Jun. 30, 2018USD ($)a | Jun. 30, 2017USD ($) | Feb. 14, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 20, 2017USD ($) | May 08, 2017USD ($) | Feb. 27, 2015USD ($) | Jul. 18, 2014USD ($) | Oct. 31, 2013item |
Long-Term Debt | |||||||||||||||||||
Debt issuance costs | $ 3,118 | $ 3,708 | $ 9,832 | $ 6,205 | |||||||||||||||
Wycross | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Number of wells, gross | item | 13 | ||||||||||||||||||
SR | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Borrowings | $ 24,000 | ||||||||||||||||||
SR | TMS | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Net acres | a | 14,000 | 14,000 | |||||||||||||||||
7.25% Senior Notes | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Minimum subsidiary indebtedness guarantee | $ 10,000 | ||||||||||||||||||
Minimum subsidiary indebtedness guarantee (as a percent) | 100.00% | ||||||||||||||||||
7.25% Senior Notes | Prior to February 15, 2020 | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Redemption price of debt instrument (as a percent) | 35.00% | ||||||||||||||||||
Debt redeemable during the period (as a percent) | 107.25% | ||||||||||||||||||
7.75% Notes | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Face value of debt | $ 200,000 | $ 400,000 | $ 600,000 | ||||||||||||||||
Interest rate (as a percent) | 7.75% | 7.75% | 7.75% | ||||||||||||||||
Percentage value of Additional Notes at which they are offered in private offering | 96.50% | ||||||||||||||||||
Proceeds for issuance of notes, net of discount/premium and related offering expenses | $ 188,800 | $ 388,000 | $ 192,900 | ||||||||||||||||
Debt issuance costs | $ 4,200 | ||||||||||||||||||
Proceeds from interest received | $ 4,100 | ||||||||||||||||||
6.125% Notes | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Face value of debt | $ 300,000 | $ 850,000 | $ 1,150,000 | ||||||||||||||||
Interest rate (as a percent) | 6.125% | 6.125% | 6.125% | ||||||||||||||||
Percentage value of Additional Notes at which they are offered in private offering | 100.75% | ||||||||||||||||||
Proceeds for issuance of notes, net of discount/premium and related offering expenses | $ 295,900 | $ 829,000 | $ 299,700 | ||||||||||||||||
Premium on face value of debt | 2,300 | $ 1,225 | $ 1,225 | $ 1,360 | |||||||||||||||
Debt issuance costs | $ 6,400 | ||||||||||||||||||
Proceeds from interest received | $ 3,800 | ||||||||||||||||||
Area of real estate (in acres) | a | 106,000 | ||||||||||||||||||
6.125% Notes | Prior to July 15, 2018 | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Redemption price of debt instrument (as a percent) | 100.00% | ||||||||||||||||||
Previous First Lien Credit Agreement | 6.125% Notes | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Face value of debt | $ 100,000 | ||||||||||||||||||
Third Amended And Restated Credit Agreement | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Maximum borrowing capacity | $ 25,000 | ||||||||||||||||||
Borrowings | 0 | $ 0 | |||||||||||||||||
Letters of credit outstanding | 0 | $ 0 | |||||||||||||||||
Percentage of commitment fee on unused committed amount | 0.50% | ||||||||||||||||||
Third Amended And Restated Credit Agreement | Maximum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Cross default covenant, aggregate principal amount threshold | $ 40,000 | ||||||||||||||||||
Third Amended And Restated Credit Agreement | Alternate base rate | Minimum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 1.50% | ||||||||||||||||||
Third Amended And Restated Credit Agreement | Alternate base rate | Maximum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 2.25% | ||||||||||||||||||
Third Amended And Restated Credit Agreement | Eurodollar rate | Minimum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 2.50% | ||||||||||||||||||
Third Amended And Restated Credit Agreement | Eurodollar rate | Maximum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 3.25% | ||||||||||||||||||
SN UnSub Credit Agreement | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Maximum borrowing capacity | $ 500,000 | ||||||||||||||||||
Borrowings | 167,500 | $ 167,500 | |||||||||||||||||
Letters of credit outstanding | $ 0 | $ 0 | |||||||||||||||||
Borrowing base | $ 330,000 | $ 380,000 | |||||||||||||||||
Percentage of increased net debt used to calculate reduction in borrowing base | 25.00% | ||||||||||||||||||
Aggregate principal amount | $ 25,000 | ||||||||||||||||||
Junior debt issuances | $ 200,000 | ||||||||||||||||||
Effective borrowing base | 5.00% | ||||||||||||||||||
Number of subsidiaries | subsidiary | 0 | ||||||||||||||||||
SN UnSub Credit Agreement | Minimum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Current ratio | 1 | 1 | |||||||||||||||||
SN UnSub Credit Agreement | Maximum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Percentage of commitment fee on unused committed amount | 0.50% | ||||||||||||||||||
Ratio of total debt outstanding to consolidated EBITDA | 4 | ||||||||||||||||||
SN UnSub Credit Agreement | Alternate base rate | Minimum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 1.00% | ||||||||||||||||||
SN UnSub Credit Agreement | Alternate base rate | Maximum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 2.00% | ||||||||||||||||||
SN UnSub Credit Agreement | Eurodollar rate | Minimum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 2.00% | ||||||||||||||||||
SN UnSub Credit Agreement | Eurodollar rate | Maximum | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Variable rate basis, spread percentage | 3.00% | ||||||||||||||||||
Letters of credit | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Maximum borrowing capacity | $ 50,000 | ||||||||||||||||||
SR Credit Agreement | |||||||||||||||||||
Long-Term Debt | |||||||||||||||||||
Net acres | a | 14,000 | 14,000 |
Derivative Instruments (Details
Derivative Instruments (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018USD ($)$ / bbl$ / MMBTU | Jun. 30, 2018USD ($)MMBTU$ / bbl$ / MMBTUbbl | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Derivatives Fair Value [Line Items] | ||||
Deferred payment of premiums | $ 102,904 | $ 102,904 | $ 56,190 | |
Reconciliation of the changes in fair value of the commodity derivatives | ||||
Beginning fair value of derivatives | (1,551) | |||
Loss on embedded derivatives | (6,053) | (1,551) | ||
Initial fair value of earnout derivatives | 6,401 | |||
Gains (losses) on derivatives | 1,300 | 1,527 | ||
Ending fair value of derivatives | 324 | 324 | (1,551) | (1,551) |
Commodity derivatives | ||||
Reconciliation of the changes in fair value of the commodity derivatives | ||||
Beginning fair value of derivatives | (54,255) | $ (35,014) | (35,014) | |
Ending fair value of derivatives | $ (122,283) | (122,283) | (54,255) | |
Commodity derivatives | Oil Reserves | ||||
Reconciliation of the changes in fair value of the commodity derivatives | ||||
Gains (losses) on derivatives | (108,018) | (48,966) | ||
Net settlements paid (received) on commodity derivative contracts: | 51,996 | (11,807) | ||
Commodity derivatives | Natural gas | ||||
Reconciliation of the changes in fair value of the commodity derivatives | ||||
Gains (losses) on derivatives | (6,099) | 42,764 | ||
Net settlements paid (received) on commodity derivative contracts: | $ (5,907) | $ (1,232) | ||
Not designated as hedges | Swaption | Call | 2019 | ||||
Derivatives Fair Value [Line Items] | ||||
Notional amount (in barrels) | bbl | 730,000 | |||
Average swap price per unit | $ / bbl | 55 | 55 | ||
Not designated as hedges | Swaps | July 1 - December 31, 2018 | Oil Reserves | ||||
Derivatives Fair Value [Line Items] | ||||
Notional amount (in barrels) | bbl | 4,039,794 | |||
Average swap price per unit | $ / bbl | 52.27 | 52.27 | ||
Not designated as hedges | Swaps | July 1 - December 31, 2018 | Natural gas | ||||
Derivatives Fair Value [Line Items] | ||||
Notional amount (in MMBtu) | MMBTU | 34,957,648 | |||
Average swap price per unit | $ / MMBTU | 3.01 | 3.01 | ||
Not designated as hedges | Swaps | 2019 | Oil Reserves | ||||
Derivatives Fair Value [Line Items] | ||||
Notional amount (in barrels) | bbl | 3,149,000 | |||
Average swap price per unit | $ / bbl | 51.91 | 51.91 | ||
Not designated as hedges | Swaps | 2019 | Natural gas | ||||
Derivatives Fair Value [Line Items] | ||||
Notional amount (in MMBtu) | MMBTU | 17,644,000 | |||
Average swap price per unit | $ / MMBTU | 2.90 | 2.90 | ||
Not designated as hedges | Swaps | 2020 | Oil Reserves | ||||
Derivatives Fair Value [Line Items] | ||||
Notional amount (in barrels) | bbl | 599,400 | |||
Average swap price per unit | $ / bbl | 54.31 | 54.31 | ||
Not designated as hedges | Swaps | 2020 | Natural gas | ||||
Derivatives Fair Value [Line Items] | ||||
Notional amount (in MMBtu) | MMBTU | 3,862,500 | |||
Average swap price per unit | $ / MMBTU | 2.74 | 2.74 |
Derivative Instruments (Balance
Derivative Instruments (BalanceSheet) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Offsetting Derivative Assets: | ||
Gross Amount of Recognized Assets | $ 12,939 | $ 18,610 |
Gross Amounts Offset in the Condensed Consolidated Balance Sheets | (862) | (752) |
Net Amounts Presented in the Condensed Consolidated Balance Sheets | 12,077 | 17,858 |
Offsetting Derivative Liabilities: | ||
Gross Amount of Recognized Liabilities | 134,898 | 74,416 |
Gross Amounts Offset in the Condensed Consolidated Balance Sheets | (862) | (752) |
Net Amounts Presented in the Condensed Consolidated Balance Sheets | 134,036 | 73,664 |
Current asset | ||
Offsetting Derivative Assets: | ||
Gross Amount of Recognized Assets | 3,791 | 16,510 |
Gross Amounts Offset in the Condensed Consolidated Balance Sheets | (550) | (80) |
Net Amounts Presented in the Condensed Consolidated Balance Sheets | 3,241 | 16,430 |
Long-term asset | ||
Offsetting Derivative Assets: | ||
Gross Amount of Recognized Assets | 9,148 | 2,100 |
Gross Amounts Offset in the Condensed Consolidated Balance Sheets | (312) | (672) |
Net Amounts Presented in the Condensed Consolidated Balance Sheets | 8,836 | 1,428 |
Current liability | ||
Offsetting Derivative Liabilities: | ||
Gross Amount of Recognized Liabilities | 103,454 | 56,270 |
Gross Amounts Offset in the Condensed Consolidated Balance Sheets | (550) | (80) |
Net Amounts Presented in the Condensed Consolidated Balance Sheets | 102,904 | 56,190 |
Long-term liability | ||
Offsetting Derivative Liabilities: | ||
Gross Amount of Recognized Liabilities | 31,444 | 18,146 |
Gross Amounts Offset in the Condensed Consolidated Balance Sheets | (312) | (672) |
Net Amounts Presented in the Condensed Consolidated Balance Sheets | $ 31,132 | $ 17,474 |
Investments (Details)
Investments (Details) - USD ($) $ in Thousands | Jun. 15, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | Mar. 01, 2017 | Nov. 22, 2016 | Oct. 02, 2015 |
Investments in marketable securities | |||||||||
Investment gains (losses) recorded | $ 1,591 | $ (1,591) | |||||||
Dividend income | 2,000 | $ 1,000 | |||||||
Gain or loss on equity method investment | 8,296 | 806 | |||||||
Equity method gains (losses) | $ 242 | 677 | |||||||
Initial investment in GRHL | $ 7,280 | ||||||||
Earnout derivative | $ 6,401 | ||||||||
SOII Facility | |||||||||
Investments in marketable securities | |||||||||
Equity method gains (losses) | $ 677 | ||||||||
Ownership of investment (as a percent) | 10.00% | ||||||||
Lonestar | |||||||||
Investments in marketable securities | |||||||||
Investments (in shares or units) | 1,500,000 | ||||||||
Ownership of investment (as a percent) | 6.10% | 6.10% | |||||||
Investment gains (losses) recorded | $ 6,700 | $ 6,200 | |||||||
Lonestar | Marquis Disposition | |||||||||
Investments in marketable securities | |||||||||
Consideration | $ 44,000 | ||||||||
SNMP | Class A Units | GRHL | |||||||||
Investments in marketable securities | |||||||||
Cost method investment, carrying value | $ 7,300 | $ 7,300 | |||||||
SN Comanche Manager | Class A Units | |||||||||
Investments in marketable securities | |||||||||
Investments (in shares or units) | 100 | ||||||||
Total units authorized for issuance | 100 | ||||||||
Common Stock | |||||||||
Investments in marketable securities | |||||||||
Ownership of investment (as a percent) | 14.20% | 14.20% | |||||||
Investment gains (losses) recorded | $ 3,300 | ||||||||
Common Stock | SNMP | |||||||||
Investments in marketable securities | |||||||||
Investments (in shares or units) | 2,272,727 | ||||||||
Investments | $ 25,000 |
Fair Value of Financial Instr57
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Fair Value of Financial Instruments | ||
Investments | $ 26,800 | $ 25,200 |
Level 3 | ||
Fair Value of Financial Instruments | ||
Derivative instruments | 0 | 0 |
Recurring basis | ||
Fair Value of Financial Instruments | ||
Cash and cash equivalents | 357,643 | 49,071 |
Embedded derivative instruments | (7,604) | (1,551) |
Earnout derivative asset | 7,928 | |
Total | 275,163 | 24,447 |
Recurring basis | SNMP | ||
Fair Value of Financial Instruments | ||
Investments | 26,818 | 25,227 |
Recurring basis | Lonestar | ||
Fair Value of Financial Instruments | ||
Investments | 12,660 | 5,955 |
Recurring basis | Active Market for Identical Assets (Level 1) | ||
Fair Value of Financial Instruments | ||
Cash and cash equivalents | 357,643 | 49,071 |
Total | 397,121 | 80,253 |
Recurring basis | Active Market for Identical Assets (Level 1) | SNMP | ||
Fair Value of Financial Instruments | ||
Investments | 26,818 | 25,227 |
Recurring basis | Active Market for Identical Assets (Level 1) | Lonestar | ||
Fair Value of Financial Instruments | ||
Investments | 12,660 | 5,955 |
Recurring basis | Observable Inputs (Level 2) | ||
Fair Value of Financial Instruments | ||
Embedded derivative instruments | (7,604) | (1,551) |
Total | (129,886) | (55,806) |
Recurring basis | Level 3 | ||
Fair Value of Financial Instruments | ||
Earnout derivative asset | 7,928 | |
Total | 7,928 | |
Oil Reserves | Recurring basis | Swaption | Call | ||
Fair Value of Financial Instruments | ||
Derivative instruments | (8,178) | (3,431) |
Oil Reserves | Recurring basis | Swaption | Call | Observable Inputs (Level 2) | ||
Fair Value of Financial Instruments | ||
Derivative instruments | (8,178) | (3,431) |
Swaps | Oil Reserves | Recurring basis | ||
Fair Value of Financial Instruments | ||
Derivative instruments | (117,479) | (66,204) |
Swaps | Oil Reserves | Recurring basis | Observable Inputs (Level 2) | ||
Fair Value of Financial Instruments | ||
Derivative instruments | (117,479) | (66,204) |
Swaps | Natural gas | Recurring basis | ||
Fair Value of Financial Instruments | ||
Derivative instruments | 3,375 | 15,380 |
Swaps | Natural gas | Recurring basis | Observable Inputs (Level 2) | ||
Fair Value of Financial Instruments | ||
Derivative instruments | $ 3,375 | $ 15,380 |
Fair Value of Financial Instr58
Fair Value of Financial Instruments (Other) (Details) - USD ($) $ in Thousands | Nov. 20, 2015 | Jun. 30, 2018 | Jun. 27, 2014 | Jun. 13, 2013 | Mar. 26, 2013 | Sep. 17, 2012 |
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Beginning balance | ||||||
Initial fair value of earnout derivative | 6,401 | |||||
Gain on earnout derivative | 1,527 | |||||
Ending balance | $ 7,928 | |||||
7.75% Notes | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Interest rate (as a percent) | 7.75% | 7.75% | ||||
7.75% Notes | Active Market for Identical Assets (Level 1) | Estimated Fair Value | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Debt fair value | $ 514,000 | |||||
6.125% Notes | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Interest rate (as a percent) | 6.125% | 6.125% | ||||
6.125% Notes | Active Market for Identical Assets (Level 1) | Estimated Fair Value | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Debt fair value | $ 788,900 | |||||
7.25% Senior Secured Notes | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Interest rate (as a percent) | 7.25% | |||||
7.25% Senior Secured Notes | Active Market for Identical Assets (Level 1) | Estimated Fair Value | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Debt fair value | $ 495,000 | |||||
Preferred Class A | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Conversion ratio (in shares) | 2.325 | |||||
Preferred Class B | ||||||
Changes in the fair value of the company s oil derivative instruments classified as Level 3 in the fair value hierarchy | ||||||
Preferred stock converted into shares of common stock | 4,500 | |||||
Conversion ratio (in shares) | 2.337 | 2.337 | ||||
Shares of common stock issued upon conversion of preferred stock | 10,517 |
Asset Retirement Obligations (D
Asset Retirement Obligations (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Changes in the asset retirement obligation | ||
Abandonment liability, beginning of period | $ 36,098 | $ 25,087 |
Liabilities incurred during period | 1,018 | 4,968 |
Acquisitions | 8,289 | |
Divestitures | (158) | (3,538) |
Revisions | (1,343) | |
Accretion expense | 1,541 | 2,635 |
Abandonment liability, end of period | $ 38,499 | $ 36,098 |
Related Party Transactions (Det
Related Party Transactions (Details) | Dec. 20, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 01, 2017USD ($)shares | Jun. 30, 2018USD ($)a | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)a$ / MMBTU | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | Aug. 11, 2017USD ($) | Nov. 22, 2016USD ($)shares | Nov. 21, 2016USD ($) | Oct. 06, 2016USD ($)mi | Jul. 05, 2016USD ($) | Oct. 02, 2015 |
Related Party Transactions | ||||||||||||||
Accounts receivable - related entities | $ 6,192,000 | $ 6,192,000 | $ 4,491,000 | |||||||||||
Earnout derivative asset | 6,401,000 | |||||||||||||
General and administrative costs | $ 29,467,000 | $ 29,713,000 | $ 51,887,000 | $ 97,178,000 | ||||||||||
Carnero Gathering, LLC | ||||||||||||||
Related Party Transactions | ||||||||||||||
Gross acres | a | 315,000 | 315,000 | ||||||||||||
Comanche | ||||||||||||||
Related Party Transactions | ||||||||||||||
Initial term of the administrative services agreement | 8 years | |||||||||||||
Administration Fee (as a percent) | 2.00% | |||||||||||||
Costs, fees or other expenses payable | $ 1,000,000 | |||||||||||||
Period for which agreement will extend automatically | 1 year | |||||||||||||
Written notice period for termination of administrative services agreement | 180 days | |||||||||||||
Comanche | Maximum | Per Month | ||||||||||||||
Related Party Transactions | ||||||||||||||
General and administrative costs | $ 500,000 | |||||||||||||
Comanche | Maximum | Per year until March 1, 2019 | ||||||||||||||
Related Party Transactions | ||||||||||||||
General and administrative costs | 5,000,000 | |||||||||||||
Comanche | Maximum | Per year, thereafter | ||||||||||||||
Related Party Transactions | ||||||||||||||
General and administrative costs | $ 10,000,000 | |||||||||||||
SOG | ||||||||||||||
Related Party Transactions | ||||||||||||||
Related party, cumulative ownership of equity interests by affiliates (as a percent) | 100.00% | |||||||||||||
General and administrative expenses and oil and natural gas production expenses | $ 15,600,000 | $ 18,700,000 | $ 33,500,000 | $ 34,200,000 | ||||||||||
Accounts receivable - related entities | $ 6,200,000 | $ 6,200,000 | 4,500,000 | |||||||||||
SR | ||||||||||||||
Related Party Transactions | ||||||||||||||
Litigation settlement, amount from other party | $ 11,750,000 | |||||||||||||
Ligitation settlement, amount from third party | 5,200,000 | |||||||||||||
Credit agreement, amount outstanding | $ 24,000,000 | |||||||||||||
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Less Noncontrolling Interest [Abstract] | ||||||||||||||
Proved oil and natural gas properties | $ 15,867,000 | |||||||||||||
Unproved properties | 7,482,000 | |||||||||||||
Other assets acquired | 2,739,000 | |||||||||||||
Fair value of assets acquired | 26,088,000 | |||||||||||||
Asset retirement obligations | (2,092,000) | |||||||||||||
Fair value of net assets acquired | $ 23,996,000 | |||||||||||||
SR | TMS | ||||||||||||||
Related Party Transactions | ||||||||||||||
Net acres | a | 14,000 | 14,000 | ||||||||||||
SNMP | ||||||||||||||
Related Party Transactions | ||||||||||||||
Accounts payable - related entities | $ 4,700,000 | $ 4,700,000 | 9,800,000 | |||||||||||
Incremental fee per barrel of water, payable to SNMP | $ 1 | |||||||||||||
Contingent lease option exercise payment | $ 1 | |||||||||||||
Contingent crude storage terminal payment | $ 250,000 | |||||||||||||
Contingent payment, crude storage terminal within number of miles of a project | mi | 5 | |||||||||||||
Ownership of General Partner (as a percent) | 100.00% | |||||||||||||
SNMP | Carnero Gathering, LLC | ||||||||||||||
Related Party Transactions | ||||||||||||||
Ownership of investment (as a percent) | 50.00% | 50.00% | ||||||||||||
Assumption of capital commitments | $ 7,400,000 | |||||||||||||
Deferred gain in other liabilities | $ 8,700,000 | |||||||||||||
Seco Pipeline, LLC | ||||||||||||||
Related Party Transactions | ||||||||||||||
Agreement for transported natural gas quantities to SN Catarina (price per unit) | $ / MMBTU | 0.22 | |||||||||||||
Perpetual term of agreement unless terminated | 1 month | |||||||||||||
SN Comanche Manager | Class A Units | ||||||||||||||
Related Party Transactions | ||||||||||||||
Investments (in shares or units) | shares | 100 | |||||||||||||
Total units authorized for issuance | shares | 100 | |||||||||||||
Antonio R. Sanchez, Jr. | SNMP | ||||||||||||||
Related Party Transactions | ||||||||||||||
Ownership of minority owner (as a percent) | 0.72% | 0.72% | ||||||||||||
Antonio R. Sanchez, III | SNMP | ||||||||||||||
Related Party Transactions | ||||||||||||||
Ownership of minority owner (as a percent) | 2.47% | 2.47% | ||||||||||||
Patricio D. Sanchez | SNMP | ||||||||||||||
Related Party Transactions | ||||||||||||||
Ownership of minority owner (as a percent) | 2.42% | 2.42% | ||||||||||||
Eduardo A. Sanchez | SNMP | ||||||||||||||
Related Party Transactions | ||||||||||||||
Ownership of minority owner (as a percent) | 3.52% | 3.52% | ||||||||||||
Targa | Carnero Processing, LLC | ||||||||||||||
Related Party Transactions | ||||||||||||||
Assumption of capital commitments | $ 24,500,000 | |||||||||||||
Deferred gain in other liabilities | $ 7,500,000 | |||||||||||||
Targa | Carnero Gathering, LLC | ||||||||||||||
Related Party Transactions | ||||||||||||||
Ownership of investment (as a percent) | 50.00% | 50.00% | ||||||||||||
SOII Facility | ||||||||||||||
Related Party Transactions | ||||||||||||||
Ownership of investment (as a percent) | 10.00% | |||||||||||||
SOII Facility | Targa | ||||||||||||||
Related Party Transactions | ||||||||||||||
Related party, cumulative ownership of equity interests by affiliates (as a percent) | 100.00% | |||||||||||||
Common Stock | SNMP | ||||||||||||||
Related Party Transactions | ||||||||||||||
Investments (in shares or units) | shares | 2,272,727 | |||||||||||||
Investments | $ 25,000,000 |
Accrued Liabilities and Other61
Accrued Liabilities and Other Current Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 |
Accrued Liabilities and Other Current Liabilities. | |||
Capital expenditures | $ 93,506 | $ 85,340 | |
General and administrative costs | 8,440 | 8,855 | |
Production taxes | 5,444 | 5,084 | |
Ad valorem taxes | 7,721 | 84 | |
Lease operating expenses | 26,520 | 32,152 | |
Interest payable | 47,911 | 34,632 | |
Preferred stock dividends and other | 3,987 | ||
Total accrued liabilities | 189,542 | 170,134 | |
Revenue payable | 83,705 | 72,451 | |
Production tax payable | 3,881 | 2,774 | |
Other | 12,865 | 6,745 | |
Total other payables | 100,451 | 81,970 | |
Operated prepayment liability | 41,636 | 88,999 | |
Deferred gain on Western Catarina Midstream Divestiture - short term | 23,720 | 23,720 | |
Phantom compensation payable - short term | 5,751 | 2,525 | |
Total other current liabilities | $ 71,107 | $ 115,244 | $ 88,269 |
Stockholders' and Mezzanine E62
Stockholders' and Mezzanine Equity (Details) | Feb. 06, 2017USD ($)$ / sharesshares | Nov. 20, 2015shares | Jul. 28, 2015itemshares | Mar. 26, 2013USD ($)$ / sharesshares | Sep. 17, 2012USD ($)$ / sharesshares | Jun. 30, 2018USD ($)item$ / sharesshares | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($)$ / shares | May 25, 2017USD ($) | Mar. 01, 2017shares |
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | ||||||||
Issuance of common stock | $ | $ 135,942,000 | |||||||||
Common shares issued | $ | $ 568,000 | |||||||||
Preferred Units issued ( in shares) | $ | $ 500,000,000 | |||||||||
Number of rights declared for each common stock | 1 | |||||||||
Number of rights automatically attached | item | 1 | |||||||||
Dividends accrued or accumulated | $ | $ 3,987,000 | |||||||||
SN Comanche Manager | Class A Units | ||||||||||
Total units authorized for issuance | 100 | |||||||||
Common Stock | ||||||||||
Number of shares issued (in shares) | 10,000,000 | |||||||||
Shares issued, price per share (in dollars per share) | $ / shares | $ 12.50 | |||||||||
Number of shares of common stock to be issued if all preferred shares are converted | 4,275,640 | |||||||||
Preferred Class A | ||||||||||
Number of shares issued (in shares) | 3,000,000 | |||||||||
Shares issued, price per share (in dollars per share) | $ / shares | $ 50 | |||||||||
Proceeds from the private placement of preferred stock | $ | $ 144,500,000 | |||||||||
Issuance costs related to preferred units | $ | $ 5,500,000 | |||||||||
Conversion ratio (in shares) | 2.325 | |||||||||
Conversion price (in dollars per share) | $ / shares | $ 21.51 | |||||||||
Annual dividend (as a percent) | 4.875% | 4.875% | ||||||||
Liquidation preference (in dollars per share) | $ / shares | $ 50 | |||||||||
Number of directors who can be elected upon failure to pay dividend for six or more quarters | item | 2 | |||||||||
Preferred Class A | Minimum | ||||||||||
Period of failure to pay dividend, resulting into appointment of board of directors | 1 year 6 months | |||||||||
Condition for automatic conversion: Closing sale price of common stock as a percentage of conversion price for specified period prior to conversion | 130.00% | |||||||||
Preferred Class B | ||||||||||
Number of shares issued (in shares) | 4,500,000 | |||||||||
Shares issued, price per share (in dollars per share) | $ / shares | $ 50 | |||||||||
Proceeds from the private placement of preferred stock | $ | $ 216,600,000 | |||||||||
Issuance costs related to preferred units | $ | $ 8,400,000 | |||||||||
Conversion ratio (in shares) | 2.337 | 2.337 | ||||||||
Conversion price (in dollars per share) | $ / shares | $ 21.40 | |||||||||
Number of shares of common stock to be issued if all preferred shares are converted | 8,244,539 | |||||||||
Annual dividend (as a percent) | 6.50% | 6.50% | ||||||||
Liquidation preference (in dollars per share) | $ / shares | $ 50 | |||||||||
Number of directors who can be elected upon failure to pay dividend for six or more quarters | item | 2 | |||||||||
Preferred stock converted into shares of common stock | 4,500 | |||||||||
Shares of common stock issued upon conversion of preferred stock | 10,517 | |||||||||
Preferred Class B | Minimum | ||||||||||
Period of failure to pay dividend, resulting into appointment of board of directors | 1 year 6 months | |||||||||
Condition for automatic conversion: Closing sale price of common stock as a percentage of conversion price for specified period prior to conversion | 130.00% | |||||||||
SN UnSub Preferred Units | ||||||||||
Internal rate of return | 14.00% | |||||||||
Purchase price for unit | 1.50 | |||||||||
ATM offering | Common Stock | ||||||||||
Common shares issued | $ | $ 0 | |||||||||
ATM offering | Common Stock | Maximum | ||||||||||
Common stock available for issuance | $ | $ 75,000,000 | |||||||||
IPO | Common Stock | ||||||||||
Net of underwriters discounts (in dollars per share) | $ / shares | $ 11.7902 | |||||||||
Over-allotment option | ||||||||||
Number of shares issued (in shares) | 1,500,000 | |||||||||
Period of options to purchase common stock | 30 days | |||||||||
Issuance of common stock | $ | $ 135,900,000 | |||||||||
Payments for underwriting discounts | $ | $ 7,800,000 | |||||||||
The "Comanche Assets" | SN UnSub Preferred Units | ||||||||||
Distributions (as percent) | 10.00% | |||||||||
The "Comanche Assets" | GSO Capital Partners LP | ||||||||||
Number of shares issued (in shares) | 1,455,000 | |||||||||
Issuance of warrants | 1,940,000 | |||||||||
Issuance of warrants (in dollars per share) | $ / shares | $ 10 | |||||||||
The "Comanche Assets" | GSO Capital Partners LP | SN UnSub Preferred Units | ||||||||||
Preferred Units issued ( in shares) | $ | $ 485,000 | |||||||||
Preferred Units issued | $ | $ 485,000,000 | |||||||||
The "Comanche Assets" | Intrepid Private Equity V-A, LLC | ||||||||||
Number of shares issued (in shares) | 45,000 | |||||||||
Issuance of warrants | 60,000 | |||||||||
Issuance of warrants (in dollars per share) | $ / shares | $ 10 | |||||||||
The "Comanche Assets" | Intrepid Private Equity V-A, LLC | SN UnSub Preferred Units | ||||||||||
Preferred Units issued ( in shares) | $ | $ 15,000 | |||||||||
Preferred Units issued | $ | $ 15,000,000 | |||||||||
The "Comanche Assets" | Blackstone Warrant Holders | ||||||||||
Number of warrants | $ / shares | 3 | |||||||||
Issuance of warrants | 6,500,000 | |||||||||
Issuance of warrants (in dollars per share) | $ / shares | $ 10 |
Stockholders' and Mezzanine E63
Stockholders' and Mezzanine Equity (Mezzanine Equity) (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Stockholders' and Mezzanine Equity | ||
Mezzanine equity beginning balance | $ 427,512 | |
Private placement of SN UnSub Preferred Units | 500,000 | |
Discount | (90,527) | |
Accretion of discount | 12,119 | 18,039 |
Dividends accrued | 25,000 | 41,667 |
Dividends prepaid | (2,592) | |
Dividends/distributions paid | (9,908) | (41,667) |
Total mezzanine equity | $ 452,131 | $ 427,512 |
Stockholders' and Mezzanine E64
Stockholders' and Mezzanine Equity (EPS) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Earnings (Loss) Per Share | ||||
Net income (loss) | $ (34,987) | $ 52,988 | $ (39,804) | $ 68,723 |
Preferred stock dividends | (3,987) | (3,987) | (7,974) | (7,974) |
Preferred unit dividends and distributions | (12,500) | (10,950) | (22,408) | (27,415) |
Preferred unit amortization | (6,189) | (5,282) | (12,119) | (6,992) |
Net loss allocable to participating securities | (2,378) | (1,974) | ||
Net income (loss) attributable to common stockholders | $ (57,663) | $ 30,391 | $ (82,305) | $ 24,368 |
Weighted average number of unrestricted outstanding common shares used to calculate basic net income (loss) per share | 81,787,000 | 76,395,000 | 81,356,000 | 73,045,000 |
Dilutive shares | 12,620,000 | 100,000 | ||
Denominator for diluted income (loss) per common share | 81,787,000 | 89,015,000 | 81,356,000 | 73,145,000 |
Net income (loss) per common share - basic (in dollars per share) | $ (0.71) | $ 0.40 | $ (1.01) | $ 0.33 |
Net income (loss) per common share - diluted (in dollars per share) | $ (0.71) | $ 0.39 | $ (1.01) | $ 0.33 |
Restricted stock | ||||
Earnings (Loss) Per Share | ||||
Net loss allocable to participating securities | $ 0 | $ 0 | ||
Anti-dilutive stock | 2,484,202 | 942,841 | 756,417 | 1,304,160 |
Common Stock | ||||
Earnings (Loss) Per Share | ||||
Anti-dilutive stock | 12,520,179 | 12,520,179 | 12,520,179 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) $ / shares in Units, $ in Thousands | Apr. 17, 2018shares | Mar. 01, 2017shares | Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2017USD ($)shares | Jun. 30, 2018USD ($)agreement$ / sharesitemshares | Jun. 30, 2017USD ($)shares | Dec. 31, 2017shares |
Stock-Based Compensation | |||||||
Maximum number of shares of common stock | 17,239,790 | 17,239,790 | |||||
Common stock available for incentive awards, as a percentage of the issued and outstanding shares of common stock | 15.00% | 15.00% | |||||
Total stock-based compensation expense | $ | $ 9,668 | $ 7,359 | $ 8,395 | $ 30,391 | |||
Additional disclosure related to compensation cost | |||||||
Closing price of common stock (in dollars per share) | $ / shares | $ 4.52 | $ 4.52 | |||||
Target phantom shares granted (as a percent) | 0.00% | ||||||
Minimum | |||||||
Additional disclosure related to compensation cost | |||||||
Target phantom shares granted (as a percent) | 0.00% | ||||||
Maximum | |||||||
Additional disclosure related to compensation cost | |||||||
Target phantom shares granted (as a percent) | 200.00% | ||||||
Restricted stock | |||||||
Stock-Based Compensation | |||||||
Number of new forms of stock award agreements | agreement | 2 | ||||||
Additional disclosure related to compensation cost | |||||||
Unrecognized compensation costs related to non-vested restricted shares outstanding | $ | $ 20,900 | $ 20,900 | |||||
Expected average period for recognition of unrecognized compensation costs | 2 years 2 months 12 days | ||||||
Number of Non-Vested Shares | |||||||
Shares available for future issuance to participants | 5,800,000 | 5,800,000 | |||||
Restricted stock | Vesting in equal annual increments over three year period | |||||||
Stock-Based Compensation | |||||||
Vesting period | 3 years | ||||||
Restricted stock | Cliff vesting after five years | |||||||
Stock-Based Compensation | |||||||
Vesting period | 5 years | ||||||
Restricted stock | Employees of SOG | |||||||
Stock-Based Compensation | |||||||
Vesting period | 3 years | ||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 2,700,000 | 3,200,000 | |||||
Restricted stock | Directors | |||||||
Stock-Based Compensation | |||||||
Total stock-based compensation expense | $ | $ 330 | 619 | $ 627 | 4,601 | |||
Restricted stock | Non-employees | |||||||
Stock-Based Compensation | |||||||
Total stock-based compensation expense | $ | 3,023 | $ 2,982 | 2,819 | $ 10,548 | |||
PARS | |||||||
Additional disclosure related to compensation cost | |||||||
Unrecognized compensation costs related to non-vested restricted shares outstanding | $ | $ 500 | $ 500 | |||||
Expected average period for recognition of unrecognized compensation costs | 2 years 9 months 18 days | ||||||
PAPS | |||||||
Stock-Based Compensation | |||||||
Number of new forms of stock award agreements | agreement | 2 | ||||||
PARS, PAPS, and Phantom Stock award shares | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 0 | ||||||
PARS, PAPS, and Phantom Stock award shares | Vesting in equal annual increments over three year period | |||||||
Stock-Based Compensation | |||||||
Vesting period | 3 years | ||||||
PARS, PAPS, and Phantom Stock award shares | Cliff vesting after five years | |||||||
Stock-Based Compensation | |||||||
Vesting period | 5 years | ||||||
Restricted shares and PARS | |||||||
Number of Non-Vested Shares | |||||||
Non-vested shares, beginning of period (in shares) | 3,684,000 | 6,336,000 | 4,897,000 | 6,891,000 | 6,891,000 | ||
Granted (in shares) | 2,676,000 | 282,000 | 3,156,000 | 2,076,000 | |||
Vested (in shares) | (542,000) | (711,000) | (2,159,000) | (3,060,000) | |||
Forfeited (in shares) | (51,000) | (47,000) | (127,000) | (47,000) | |||
Non-vested shares, end of the period (in shares) | 5,767,000 | 5,860,000 | 5,767,000 | 5,860,000 | 4,897,000 | ||
Phantom Stock shares and PAPS | |||||||
Stock-Based Compensation | |||||||
Vesting period | 1 year 11 months 12 days | ||||||
Total stock-based compensation expense | $ | $ 5,017 | $ 3,024 | $ 4,119 | $ 13,965 | |||
Additional disclosure related to compensation cost | |||||||
Unrecognized compensation costs related to non-vested restricted shares outstanding | $ | $ 20,300 | $ 20,300 | |||||
Number of Non-Vested Shares | |||||||
Non-vested shares, beginning of period (in shares) | 3,949,000 | 4,690,000 | 3,589,000 | 4,012,000 | 4,012,000 | ||
Granted (in shares) | 2,474,000 | 191,000 | 3,652,000 | 1,986,000 | |||
Vested (in shares) | (435,000) | (663,000) | (1,150,000) | (1,780,000) | |||
Forfeited (in shares) | (100,000) | (20,000) | (203,000) | (20,000) | |||
Non-vested shares, end of the period (in shares) | 5,888,000 | 4,198,000 | 5,888,000 | 4,198,000 | 3,589,000 | ||
Phantom Stock shares and PAPS | Employees of SOG | |||||||
Stock-Based Compensation | |||||||
Vesting period | 3 years | ||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 4,600,000 | 5,800,000 | |||||
Performance awards | |||||||
Stock-Based Compensation | |||||||
Vesting period | 2 years 10 months 24 days | ||||||
Total stock-based compensation expense | $ | $ 1,298 | $ 734 | $ 830 | $ 1,277 | |||
Additional disclosure related to compensation cost | |||||||
Unrecognized compensation costs related to non-vested restricted shares outstanding | $ | 1,000 | $ 1,000 | |||||
PBPS awards | |||||||
Stock-Based Compensation | |||||||
Number of performance criteria used in determination of performance awards earned | item | 4 | ||||||
Additional disclosure related to compensation cost | |||||||
Unrecognized compensation costs related to non-vested restricted shares outstanding | $ | $ 7,400 | $ 7,400 | |||||
Expected average period for recognition of unrecognized compensation costs | 1 year 10 months 6 days | ||||||
PBPS awards | Minimum | |||||||
Stock-Based Compensation | |||||||
Vesting percentage | 0.00% | ||||||
PBPS awards | Maximum | |||||||
Stock-Based Compensation | |||||||
Vesting percentage | 200.00% | ||||||
PBPS awards | Three performance measures other than Safety (TRIR) | |||||||
Stock-Based Compensation | |||||||
Performance measure weighting in determination of performance awards earned (as a percent) | 30.00% | ||||||
PBPS awards | Performance measure for Safety (TRIR) | |||||||
Stock-Based Compensation | |||||||
Performance measure weighting in determination of performance awards earned (as a percent) | 10.00% | ||||||
PBPS awards | Overall results determination of shares earned during performance period | |||||||
Stock-Based Compensation | |||||||
Performance measure weighting in determination of performance awards earned (as a percent) | 33.00% | ||||||
Cash-settled PBPS awards | Chief Executive Officer | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 506,230 | ||||||
Cash-settled PBPS awards | Executive Chairman of the Board of Directors | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 506,230 | ||||||
Cash-settled PBPS awards | Chief Financial Officer | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 186,916 | ||||||
Cash-settled PBPS awards | Executive Vice President | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 253,115 | ||||||
Cash-settled PBPS awards | Chief Operating Officer | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 186,916 | ||||||
Stock-settled PBPS awards | Chief Executive Officer | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 506,230 | ||||||
Stock-settled PBPS awards | Executive Chairman of the Board of Directors | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 506,230 | ||||||
Stock-settled PBPS awards | Chief Financial Officer | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 186,916 | ||||||
Stock-settled PBPS awards | Executive Vice President | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 253,115 | ||||||
Stock-settled PBPS awards | Chief Operating Officer | |||||||
Number of Non-Vested Shares | |||||||
Granted (in shares) | 186,916 | ||||||
LTIP PLan | Maximum | |||||||
Stock-Based Compensation | |||||||
Vesting period | 5 years | ||||||
LTIP PLan | Chief Executive Officer | Maximum | |||||||
Additional disclosure related to compensation cost | |||||||
Target shares | 245,234 | ||||||
LTIP PLan | Executive Chairman of the Board of Directors | Maximum | |||||||
Additional disclosure related to compensation cost | |||||||
Target shares | 245,234 | ||||||
LTIP PLan | Chief Operating Officer | Maximum | |||||||
Additional disclosure related to compensation cost | |||||||
Target shares | 245,234 | ||||||
LTIP PLan | President | Maximum | |||||||
Additional disclosure related to compensation cost | |||||||
Target shares | 81,745 |
Income Taxes (Details)
Income Taxes (Details) | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Income Taxes | |||
Effective tax rate (as a percent) | 0.00% | (1.80%) | |
Federal statutory rate | 21.00% | 35.00% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Thousands | Dec. 20, 2017USD ($) | Jun. 30, 2018USD ($)item |
Operating leases | ||
Lease payment obligation | $ 158,900 | |
Corporate and field office leases | ||
Operating leases | ||
Lease payment obligation | $ 78,500 | |
SR | ||
Commitments and contingencies | ||
Litigation settlement, amount from other party | $ 11,750 | |
SN Catarina | ||
Commitments and contingencies | ||
Maximum number of wells to be drilled in each annual period | item | 50 | |
Minimum number of wells to be drilled in accordance with agreement | item | 1 | |
Consecutive period over which at least one well can be drilled in order to continue to maintain rights to any future undeveloped acreage | 120 days | |
Number of wells that can be carried over to satisfy part of the well requirement in the subsequent annual period on a well-for-well basis | item | 30 | |
Acreage Lease | ||
Operating leases | ||
Lease payment obligation | $ 4,500 | |
Term of lease | 10 years | |
Permanent improvements | ||
Operating leases | ||
Lease payment obligation | $ 4,000 | |
Western Catarina Midstream Divestiture | ||
Operating leases | ||
Lease payment obligation | 75,900 | |
Carnero Gathering, LLC | ||
Operating leases | ||
Lease payment obligation | 58,400 | |
Carnero Processing, LLC | ||
Operating leases | ||
Lease payment obligation | $ 57,700 | |
Anadarko E&P Onshore, LLC | The "Comanche Assets" | ||
Commitments and contingencies | ||
Minimum number of wells to be drilled in accordance with agreement | item | 60 | |
Number of wells that can be carried over to satisfy part of the well requirement in the subsequent annual period on a well-for-well basis | item | 30 | |
Contingent per well default fee | $ 200 |
Commitments and Contingencies68
Commitments and Contingencies (Volume Commitments) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Oil and natural gas production expenses | $ 77,644 | $ 62,620 | $ 149,592 | $ 100,620 |
Volume commitments | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | 2,021,900 | 2,021,900 | ||
Oil and natural gas production expenses | 1,700 | $ 1,400 | 2,300 | $ 1,400 |
Volume commitments 2018 through 2020 | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | 664,000 | 664,000 | ||
Volume commitments 2021 through 2023 | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | 673,500 | 673,500 | ||
Volume commitments expiring after December 31, 2023 | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | 684,400 | 684,400 | ||
Natural gas | Volume commitments | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | 571,200 | 571,200 | ||
Natural gas | Volume commitments 2018 through 2020 | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | 198,400 | 198,400 | ||
Natural gas | Volume commitments 2021 through 2023 | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | 113,500 | 113,500 | ||
Natural gas | Volume commitments expiring after December 31, 2023 | ||||
Oil and Gas Delivery Commitments and Contracts [Line Items] | ||||
Future commitments | $ 259,300 | $ 259,300 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jan. 01, 2018 | Dec. 31, 2017 | |
Total revenues | $ 259,314 | $ 175,704 | $ 510,540 | $ 309,546 | ||
Oil and natural gas receivables | 88,207 | 88,207 | $ 101,396 | |||
Derivative, Gain (Loss) on Derivative, Net | 1,300 | 1,527 | ||||
Assets | ||||||
Fair value of derivative instruments | 3,241 | 3,241 | $ 16,580 | 16,430 | ||
Total current assets | 561,999 | 561,999 | 350,948 | 350,798 | ||
Fair value of derivative instruments | 8,836 | 8,836 | 7,679 | 1,428 | ||
Total assets | 2,904,414 | 2,272,242 | 2,904,414 | 2,272,242 | 2,477,036 | 2,470,635 |
Liabilities | ||||||
Other liabilities | 34,332 | 76,799 | 34,332 | 76,799 | 49,142 | 65,480 |
Total liabilities | 2,972,158 | 2,285,510 | 2,972,158 | 2,285,510 | 2,495,925 | 2,512,263 |
Equity | ||||||
Accumulated deficit | (1,891,720) | (1,770,761) | (1,891,720) | (1,770,761) | (1,809,417) | (1,832,156) |
Total stockholders' deficit | (519,875) | (422,453) | (519,875) | (422,453) | (446,401) | (469,140) |
Total liabilities and stockholders' deficit | 2,904,414 | 2,272,242 | 2,904,414 | 2,272,242 | $ 2,477,036 | 2,470,635 |
Statement of Operations | ||||||
Other income (expense) | 6,715 | (6,618) | 10,143 | 3,917 | ||
Total other income (expense) | (104,863) | 23,449 | (188,667) | 44,977 | ||
income (loss) before income taxes | (34,987) | 52,733 | (39,804) | 67,515 | ||
Net income (loss) | (34,987) | $ 52,988 | (39,804) | $ 68,723 | ||
Accounting Standards Update 2014-09 | Balances without Adoption ASC 606 | ||||||
Assets | ||||||
Fair value of derivative instruments | 2,979 | 2,979 | 16,430 | |||
Total current assets | 561,737 | 561,737 | 350,798 | |||
Fair value of derivative instruments | 1,170 | 1,170 | 1,428 | |||
Total assets | 2,896,486 | 2,896,486 | 2,470,635 | |||
Liabilities | ||||||
Other liabilities | 50,670 | 50,670 | 65,480 | |||
Total liabilities | 2,988,496 | 2,988,496 | 2,512,263 | |||
Equity | ||||||
Accumulated deficit | (1,915,986) | (1,915,986) | (1,832,156) | |||
Total stockholders' deficit | (544,141) | (544,141) | (469,140) | |||
Total liabilities and stockholders' deficit | 2,896,486 | 2,896,486 | 2,470,635 | |||
Statement of Operations | ||||||
Other income (expense) | 5,461 | 8,616 | ||||
Total other income (expense) | (106,117) | (190,194) | ||||
income (loss) before income taxes | (36,241) | (41,331) | ||||
Net income (loss) | (36,241) | (41,331) | ||||
Accounting Standards Update 2014-09 | Effect of change higher/(lower) | ||||||
Assets | ||||||
Fair value of derivative instruments | 262 | 262 | 150 | |||
Total current assets | 262 | 262 | 150 | |||
Fair value of derivative instruments | 7,666 | 7,666 | 6,251 | |||
Total assets | 7,928 | 7,928 | 6,401 | |||
Liabilities | ||||||
Other liabilities | (16,338) | (16,338) | (16,338) | |||
Total liabilities | (16,338) | (16,338) | (16,338) | |||
Equity | ||||||
Accumulated deficit | 24,266 | 24,266 | 22,739 | |||
Total stockholders' deficit | 24,266 | 24,266 | 22,739 | |||
Total liabilities and stockholders' deficit | 7,928 | 7,928 | $ 6,401 | |||
Statement of Operations | ||||||
Other income (expense) | 1,254 | 1,527 | ||||
Total other income (expense) | 1,254 | 1,527 | ||||
income (loss) before income taxes | 1,254 | 1,527 | ||||
Net income (loss) | $ 1,254 | $ 1,527 |
Condensed Consolidating Finan70
Condensed Consolidating Financial Information (Details) | Jun. 30, 2018 |
Condensed Consolidating Financial Information | |
Ownership interest in subsidiaries (as a percent) | 100.00% |
Condensed Consolidating Finan71
Condensed Consolidating Financial Information (BalanceSheet) (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 |
Assets | |||||
Total current assets | $ 561,999 | $ 350,948 | $ 350,798 | ||
Total oil and natural gas properties, net | 2,233,948 | 2,027,459 | $ 1,900,889 | ||
Other assets | 108,467 | 92,378 | |||
Total assets | 2,904,414 | 2,477,036 | 2,470,635 | 2,272,242 | |
Liabilities and Shareholders' Equity | |||||
Current liabilities | 503,446 | 462,528 | 281,768 | ||
Long-term liabilities | 2,468,712 | 2,049,735 | |||
Mezzanine equity | 452,131 | 427,512 | |||
Total shareholders' equity (deficit) | (519,875) | (446,401) | (469,140) | (422,453) | |
Total liabilities and stockholders' deficit | 2,904,414 | $ 2,477,036 | 2,470,635 | $ 2,272,242 | |
Eliminations | |||||
Assets | |||||
Total current assets | (309,823) | (312,975) | |||
Investment in subsidiaries | (1,240,483) | (1,074,412) | |||
Total assets | (1,550,306) | (1,387,387) | |||
Liabilities and Shareholders' Equity | |||||
Current liabilities | (309,823) | (312,975) | |||
Total shareholders' equity (deficit) | (1,240,483) | (1,074,412) | |||
Total liabilities and stockholders' deficit | (1,550,306) | (1,387,387) | |||
Parent Company | |||||
Assets | |||||
Total current assets | 633,669 | 447,984 | |||
Total oil and natural gas properties, net | 121,408 | 3,987 | |||
Investment in subsidiaries | 1,247,762 | 1,081,692 | |||
Other assets | 11,824 | 25,451 | |||
Total assets | 2,014,663 | 1,559,114 | |||
Liabilities and Shareholders' Equity | |||||
Current liabilities | 199,403 | 212,026 | |||
Long-term liabilities | 2,214,683 | 1,827,072 | |||
Total shareholders' equity (deficit) | (399,423) | (479,984) | |||
Total liabilities and stockholders' deficit | 2,014,663 | 1,559,114 | |||
Combined Guarantor Subsidiaries | |||||
Assets | |||||
Total current assets | 112,281 | 98,758 | |||
Total oil and natural gas properties, net | 1,345,142 | 1,275,153 | |||
Other assets | 9,825 | 4,415 | |||
Total assets | 1,467,248 | 1,378,326 | |||
Liabilities and Shareholders' Equity | |||||
Current liabilities | 348,978 | 312,531 | |||
Long-term liabilities | 58,526 | 26,787 | |||
Total shareholders' equity (deficit) | 1,059,744 | 1,039,008 | |||
Total liabilities and stockholders' deficit | 1,467,248 | 1,378,326 | |||
Combined Non-Guarantor Subsidiaries | |||||
Assets | |||||
Total current assets | 125,872 | 117,031 | |||
Total oil and natural gas properties, net | 767,398 | 748,319 | |||
Investment in subsidiaries | (7,279) | (7,280) | |||
Other assets | 86,818 | 62,512 | |||
Total assets | 972,809 | 920,582 | |||
Liabilities and Shareholders' Equity | |||||
Current liabilities | 264,888 | 250,946 | |||
Long-term liabilities | 195,503 | 195,876 | |||
Mezzanine equity | 452,131 | 427,512 | |||
Total shareholders' equity (deficit) | 60,287 | 46,248 | |||
Total liabilities and stockholders' deficit | $ 972,809 | $ 920,582 |
Condensed Consolidating Finan72
Condensed Consolidating Financial Information (IncomeStatement) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Income Statements, Captions [Line Items] | ||||
Total revenues | $ 259,314 | $ 175,704 | $ 510,540 | $ 309,546 |
Total operating costs and expenses | (189,438) | (146,420) | (361,677) | (287,008) |
Other income (expense) | (104,863) | 23,449 | (188,667) | 44,977 |
income (loss) before income taxes | (34,987) | 52,733 | (39,804) | 67,515 |
Income tax benefit | 255 | 1,208 | ||
Net income (loss) | (34,987) | 52,988 | (39,804) | 68,723 |
Eliminations | ||||
Condensed Income Statements, Captions [Line Items] | ||||
Total operating costs and expenses | 134 | 270 | 501 | |
Other income (expense) | (134) | (270) | (501) | |
Equity in income (loss) of subsidiaries | (70,926) | (67,268) | (148,407) | (157,620) |
Net income (loss) | (70,926) | (67,268) | (148,407) | (157,620) |
Parent Company | ||||
Condensed Income Statements, Captions [Line Items] | ||||
Total operating costs and expenses | (24,721) | (22,154) | (40,252) | (86,727) |
Other income (expense) | (81,192) | 7,856 | (147,959) | (3,378) |
income (loss) before income taxes | (105,913) | (14,298) | (188,211) | (90,105) |
Income tax benefit | 18 | 1,208 | ||
Equity in income (loss) of subsidiaries | 70,926 | 67,268 | 148,407 | 157,620 |
Net income (loss) | (34,987) | 52,988 | (39,804) | 68,723 |
Combined Guarantor Subsidiaries | ||||
Condensed Income Statements, Captions [Line Items] | ||||
Total revenues | 178,842 | 111,302 | 346,328 | 223,130 |
Total operating costs and expenses | (125,167) | (70,345) | (207,833) | (124,950) |
Other income (expense) | (5,766) | 5,278 | (5,263) | 10,393 |
income (loss) before income taxes | 47,909 | 46,235 | 133,232 | 108,573 |
Income tax benefit | 237 | |||
Net income (loss) | 47,909 | 46,472 | 133,232 | 108,573 |
Combined Non-Guarantor Subsidiaries | ||||
Condensed Income Statements, Captions [Line Items] | ||||
Total revenues | 80,472 | 64,402 | 164,212 | 86,416 |
Total operating costs and expenses | (39,684) | (53,921) | (113,862) | (75,832) |
Other income (expense) | (17,771) | 10,315 | (35,175) | 38,463 |
income (loss) before income taxes | 23,017 | 20,796 | 15,175 | 49,047 |
Net income (loss) | $ 23,017 | $ 20,796 | $ 15,175 | $ 49,047 |
Condensed Consolidating Finan73
Condensed Consolidating Financial Information (CashFlows) (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Condensed Cash Flow Statements, Captions [Line Items] | ||
Net cash provided by (used in) operating activities | $ 155,294 | $ 59,761 |
Net cash provided by (used in) investing activities | (306,958) | (1,193,912) |
Net cash provided by (used in) financing activities | 404,919 | 760,481 |
Increase (decrease) in cash and cash equivalents | 253,255 | (373,670) |
Cash and cash equivalents, beginning of period | 184,434 | 501,917 |
Cash and cash equivalents, end of period | 437,689 | 128,247 |
Eliminations | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Net cash provided by (used in) investing activities | 47,669 | 236,270 |
Net cash provided by (used in) financing activities | (47,669) | (236,270) |
Parent Company | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Net cash provided by (used in) operating activities | (107,425) | (137,380) |
Net cash provided by (used in) investing activities | (49,514) | (251,400) |
Net cash provided by (used in) financing activities | 423,387 | 108,675 |
Increase (decrease) in cash and cash equivalents | 266,448 | (280,105) |
Cash and cash equivalents, beginning of period | 86,937 | 343,941 |
Cash and cash equivalents, end of period | 353,385 | 63,836 |
Combined Guarantor Subsidiaries | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Net cash provided by (used in) operating activities | 206,878 | 173,301 |
Net cash provided by (used in) investing activities | (251,777) | (419,849) |
Net cash provided by (used in) financing activities | 15,853 | 246,548 |
Increase (decrease) in cash and cash equivalents | (29,046) | |
Cash and cash equivalents, beginning of period | 29,046 | |
Combined Non-Guarantor Subsidiaries | ||
Condensed Cash Flow Statements, Captions [Line Items] | ||
Net cash provided by (used in) operating activities | 55,841 | 23,840 |
Net cash provided by (used in) investing activities | (53,336) | (758,933) |
Net cash provided by (used in) financing activities | 13,348 | 641,528 |
Increase (decrease) in cash and cash equivalents | 15,853 | (93,565) |
Cash and cash equivalents, beginning of period | 68,451 | 157,976 |
Cash and cash equivalents, end of period | $ 84,304 | $ 64,411 |
Variable Interest Entities (Det
Variable Interest Entities (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Mar. 01, 2017 | Dec. 31, 2016 | Nov. 22, 2016 |
Variable Interest Entity [Line Items] | |||||
Equity in investments | $ 32,507 | $ 39,656 | |||
Investments | $ 26,800 | $ 25,200 | |||
SN Comanche Manager | Class A Units | |||||
Variable Interest Entity [Line Items] | |||||
Total units authorized for issuance | 100 | ||||
Common Stock | SNMP | |||||
Variable Interest Entity [Line Items] | |||||
Investments | $ 25,000 |
Variable Interest Entities (Car
Variable Interest Entities (Carrying Amounts) (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Variable Interest Entities | ||
Beginning Balance | $ 32,507 | $ 39,656 |
Initial investment in GRHL | 7,280 | |
Distributions from equity investments | (311) | |
Gain (loss) from change in fair value of investment in SNMP | 1,591 | (1,591) |
Sale of investments | (12,527) | |
Equity in investments | 32,507 | |
Maximum exposure to loss | $ 34,098 | $ 32,507 |
Subsequent Events (Details)
Subsequent Events (Details) | Jul. 27, 2018 |
Subsequent Events | |
Subsequent Event [Line Items] | |
"Rights Plan" penalty, outstanding common stock ownership percentage threshold (as a percent) | 4.90% |