Yuma Energy, Inc. Retains Seaport Global Securities LLC, and Reports Third Quarter 2018 Financial Results

PR Newswire

HOUSTON, Nov. 14, 2018 /PRNewswire/ -- Yuma Energy, Inc. (NYSE American: YUMA) (the "Company") today announced that it has retained Seaport Global Securities LLC, an investment banking firm, to advise the Company on its strategic and tactical alternatives, including possible mergers, acquisitions and divestitures.  The Company also reported on its liquidity as well as its financial results for the quarter ended September 30, 2018.

Liquidity

As previously reported, the Company initiated several strategic alternatives to mitigate its limited liquidity (defined as cash on hand and undrawn borrowing base), its financial covenant compliance issues, and to provide it with additional working capital to develop its existing assets.  

During the second quarter of 2018, the Company agreed to sell its Kern County, California properties for $4.7 million in gross proceeds and the buyer's assumption of certain plugging and abandonment liabilities, and received a non-refundable deposit of $275,000.  The sale did not close as scheduled, and the buyer forfeited the deposit.  The Company currently anticipates that it will close the sale with the same buyer in the fourth quarter of 2018 on re-negotiated terms.  Upon closing, the Company anticipates that the majority of the proceeds will be applied to the repayment of borrowings under the credit facility; however, there can be no assurance that the transaction will close. 

On August 20, 2018, the Company sold its 3.1% leasehold interest consisting of 9.8 net acres in one section in Eddy County, New Mexico for $127,400.  On October 23, 2018, the Company sold substantially all of its Bakken assets in North Dakota for approximately $1.16 million in gross proceeds and the buyer's assumption of certain plugging and abandonment liabilities.  On October 24, 2018, the Company sold certain deep rights in undeveloped acreage located in Grady County, Oklahoma for approximately $120,000.  Proceeds of $1.0 million from these non-core asset sales were applied to the repayment of borrowings under the credit facility in October 2018, bringing the current outstanding balance and borrowing base under the credit facility to $34.0 million, with the balance of the proceeds used for working capital purposes.

Additionally, the Company has reduced its personnel by nine employees since December 31, 2017, a 26% decrease.  This brings the Company's headcount to 25 employees at September 30, 2018.  Also, the Company has taken additional steps to further reduce its general and administrative costs by reducing subscriptions, consultants and other non-essential services, as well as eliminating certain of its capital expenditures planned for 2018. 

The Company plans to take further steps to mitigate its limited liquidity which may include, but are not limited to, further reducing or eliminating capital expenditures; selling additional assets; further reducing general and administrative expenses; seeking merger and acquisition related opportunities; and potentially raising proceeds from capital markets transactions, including the sale of debt or equity securities.  There can be no assurance that the exploration of strategic alternatives will result in a transaction or otherwise improve the Company's limited liquidity.

The Company has borrowings under its credit facility that require, among other things, compliance with certain financial ratios and covenants.  Due to operating losses the Company sustained during recent quarters, at September 30, 2018, the Company was not in compliance under the credit facility with its (i) total debt to EBITDAX covenant for the trailing four quarter period, (ii) current ratio covenant, (iii) EBITDAX to interest expense covenant for the trailing four quarter period, and (iv) the liquidity covenant requiring the Company to maintain unrestricted cash and borrowing base availability of at least $4.0 million.  Due to this non-compliance, the Company classified its entire bank debt as a current liability in its financial statements as of September 30, 2018. 

On October 9, 2018, the Company received a notice and reservation of rights from the administrative agent under its credit facility advising that an event of default has occurred and continues to exist by reason of the Company's noncompliance with the liquidity covenant requiring it to maintain cash and cash equivalents and borrowing base availability of at least $4.0 million. As a result of the default, the lenders may accelerate the outstanding balance under the credit facility, increase the applicable interest rate by 2.0% per annum or commence foreclosure on the collateral securing the loans. As of the date of this release, the lenders have not accelerated the outstanding amount due and payable on the loans, increased the applicable interest rate or commenced foreclosure proceedings, but they may exercise one or more of these remedies in the future. The Company intends to commence discussions with the lenders under the credit facility concerning a forbearance agreement or waiver of the event of default; however, there can be no assurance that the Company and the lenders will come to any agreement regarding a forbearance or waiver of the event of default.

As of September 30, 2018, the Company had outstanding borrowings of $35.0 million under its credit facility, and its total borrowing base was $35.0 million, leaving no undrawn borrowing base.  Due to drilling activities and other factors, the Company had a working capital deficit of $41.07 million (inclusive of the Company's outstanding debt under its credit facility) and a loss from operations of $6.89 million for the nine months ended September 30, 2018.

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

Third Quarter 2018 Financial Results

Production

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


Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Production volumes:








Crude oil and condensate (Bbls)

42,642


57,134


137,121


199,774

Natural gas (Mcf)

500,969


757,361


1,672,650


2,442,899

Natural gas liquids (Bbls)

22,894


32,694


77,111


101,260

Total (Boe) (1)

149,031


216,055


493,007


708,184

Average prices realized:








Crude oil and condensate (per Bbl)

$72.48


$47.86


$68.26


$48.42

Natural gas (per Mcf)

$2.92


$3.04


$3.01


$3.05

Natural gas liquids (per Bbl)

$38.12


$23.81


$32.47


$23.68



(1)

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

Revenues

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


Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Sales of natural gas and crude oil:








Crude oil and condensate

$ 3,090,585


$ 2,734,269


$   9,360,102


$   9,673,049

Natural gas

1,463,581


2,304,154


5,030,751


7,445,564

Natural gas liquids

872,689


778,460


2,504,115


2,397,398

Total revenues

$ 5,426,855


$ 5,816,883


$ 16,894,968


$ 19,516,011

Expenses

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


Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017

Lease operating expenses

$1,609,659


$1,506,747


$5,165,788


$5,049,551

Severance, ad valorem taxes and marketing

855,361


1,002,605


2,720,825


3,180,189

Total LOE

$2,465,020


$2,509,352


$7,886,613


$8,229,740









LOE per Boe

$16.54


$11.61


$16.00


$11.62

LOE per Boe without severance, ad valorem taxes and marketing

$10.80


$6.97


$10.48


$7.13

Commodity Derivative Instruments

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


2018


2019


2020


Settlement


Settlement


Settlement

NATURAL GAS (MMBtu):






Swaps






Volume

438,434


1,660,297


1,095,430

Price 

$2.97


$2.75


$2.68







CRUDE OIL (Bbls):






Swaps






Volume

43,768


156,320



Price 

$53.17


$53.77



About Yuma Energy, Inc.

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

Forward-Looking Statements

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

Yuma Energy, Inc.


CONSOLIDATED BALANCE SHEETS

(Unaudited)



September 30,


December 31,


2018


2017





ASSETS 








CURRENT ASSETS:




Cash and cash equivalents 

$     2,545,644


$       137,363

Accounts receivable, net of allowance for doubtful accounts:




Trade

2,795,115


4,496,316

Officer and employees

4,229


53,979

Other

487,678


1,004,479

Prepayments

373,884


976,462

Other deferred charges

307,686


347,490





Total current assets

6,514,236


7,016,089





OIL AND GAS PROPERTIES (full cost method):




Proved properties

504,594,550


494,216,531

Unproved properties - not subject to amortization

-


6,794,372






504,594,550


501,010,903

Less:  accumulated depreciation, depletion, amortization and impairment

(431,069,270)


(421,165,400)





Net oil and gas properties

73,525,280


79,845,503





OTHER PROPERTY AND EQUIPMENT:




Assets held for sale

2,309,243


-

Land, buildings and improvements

-


1,600,000

Other property and equipment

1,793,397


2,845,459


4,102,640


4,445,459

Less: accumulated depreciation and amortization

(1,339,896)


(1,409,535)





Net other property and equipment

2,762,744


3,035,924





OTHER ASSETS AND DEFERRED CHARGES:




Deposits

467,592


467,592

Other noncurrent assets

79,997


270,842





Total other assets and deferred charges

547,589


738,434





TOTAL ASSETS 

$   83,349,849


$  90,635,950

 

Yuma Energy, Inc.


CONSOLIDATED BALANCE SHEETS – CONTINUED

(Unaudited)



September 30,


December 31,


2018


2017





LIABILITIES AND EQUITY








CURRENT LIABILITIES:




Current maturities of debt

$   35,000,000


$       651,124

Accounts payable, principally trade

7,582,015


11,931,218

Commodity derivative instruments

3,001,449


903,003

Asset retirement obligations

325,805


277,355

Other accrued liabilities

1,678,112


2,295,438





Total current liabilities

47,587,381


16,058,138





LONG-TERM DEBT

-


27,700,000





OTHER NONCURRENT LIABILITIES:




Asset retirement obligations

10,395,929


10,189,058

Commodity derivative instruments

545,992


336,406

Deferred rent

261,698


290,566

Employee stock awards

115,616


191,110





Total other noncurrent liabilities

11,319,235


11,007,140





COMMITMENTS AND CONTINGENCIES (Notes 2 and 15)








EQUITY




Series D convertible preferred stock ($0.001 par value, 7,000,000 authorized, 2,005,849 issued and outstanding as of September 30, 2018, and 1,904,391 issued and outstanding as of December 31, 2017)

2,006


1,904

Common stock ($0.001 par value, 100 million shares authorized, 23,243,763 outstanding as of September 30, 2018 and 22,661,758 outstanding as of December 31, 2017)

23,244


22,662

Additional paid-in capital

57,873,967


55,064,685

Treasury stock at cost (380,525 shares as of September 30, 2018 and 13,343 shares as of December 31, 2017)

(439,099)


(25,278)

Accumulated earnings (deficit)

(33,016,885)


(19,193,301)





Total equity

24,443,233


35,870,672





TOTAL LIABILITIES AND EQUITY

$   83,349,849


$  90,635,950

 

Yuma Energy, Inc.


CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



Three Months Ended September 30,


Nine Months Ended September 30,


2018


2017


2018


2017









REVENUES:








Sales of natural gas and crude oil

$  5,426,855


$  5,816,883


$  16,894,968


$ 19,516,011









EXPENSES:








Lease operating and production costs

2,465,020


2,509,352


7,886,613


8,229,740

General and administrative – stock-based compensation

143,214


414,660


503,738


851,492

General and administrative – other

1,314,666


1,622,528


4,651,532


5,705,159

Deposit forfeiture

(275,000)


-


(275,000)


-

Depreciation, depletion and amortization

2,140,310


2,761,668


6,602,801


8,666,052

Asset retirement obligation accretion expense

140,701


138,867


423,802


418,890

Impairment of oil and gas properties

3,397,281


-


3,397,281


-

Impairment of long lived assets

-


-


176,968


-

Bad debt expense (recovery)

85,928


(38,706)


413,395


34,807

Total expenses

9,412,120


7,408,369


23,781,130


23,906,140









LOSS FROM OPERATIONS

(3,985,265)


(1,591,486)


(6,886,162)


(4,390,129)









OTHER INCOME (EXPENSE):








Net gains (losses) from commodity derivatives

(873,723)


(1,260,280)


(4,220,553)


4,434,583

Interest expense

(637,772)


(429,313)


(1,671,700)


(1,407,689)

Gain (loss) on other property and equipment

-


-


-


484,768

Other, net

43


14,043


78,390


56,110

Total other income (expense)

(1,511,452)


(1,675,550)


(5,813,863)


3,567,772









INCOME (LOSS) BEFORE INCOME TAXES

(5,496,717)


(3,267,036)


(12,700,025)


(822,357)









Income tax expense (benefit)

-


2,539


-


8,489









NET INCOME (LOSS)

(5,496,717)


(3,269,575)


(12,700,025)


(830,846)









PREFERRED STOCK:








Dividends paid in kind

385,125


359,311


1,123,559


1,048,221









NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS

$ (5,881,842)


$ (3,628,886)


$ (13,823,584)


$ (1,879,067)









INCOME (LOSS) PER COMMON SHARE:








Basic

($0.25)


($0.29)


($0.60)


($0.15)

Diluted

($0.25)


($0.29)


($0.60)


($0.15)









WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:








Basic

23,096,359


12,483,724


22,998,312


12,311,087

Diluted

23,096,359


12,483,724


22,998,312


12,311,087

 

Yuma Energy, Inc.


CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Nine Months Ended September 30,


2018


2017

CASH FLOWS FROM OPERATING ACTIVITIES:




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




Net income (loss)

$ (12,700,025)


$   (830,846)

Depreciation, depletion and amortization of property and equipment

6,602,801


8,666,052

Impairment of oil and gas properties

3,397,281


-

Impairment of long lived assets

176,968


-

Amortization of debt issuance costs

340,225


277,293

Deferred rent liability, net

18,219


163,962

Stock-based compensation expense

503,738


851,492

Settlement of asset retirement obligations

(590,709)


(430,415)

Asset retirement obligation accretion expense

423,802


418,890

Bad debt expense

413,395


34,807

Net (gains) losses from commodity derivatives

4,220,553


(4,434,583)

Gain on sales of fixed assets

-


(556,141)

Loss on write-off of abandoned facilities

-


71,373

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

(103,044)


(34,835)

Changes in assets and liabilities:




(Increase) decrease in accounts receivable

1,864,956


736,959

Decrease in prepaids, deposits and other assets

546,280


715,603

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

(380,292)


(1,177,583)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

4,734,148


4,472,028





CASH FLOWS FROM INVESTING ACTIVITIES:




Capital expenditures for oil and gas properties

(7,711,751)


(5,964,781)

Proceeds from sale of oil and gas properties

1,127,400


5,400,563

Proceeds from sale of other fixed assets

-


645,791

Derivative settlements

(1,912,521)


1,103,525

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

(8,496,872)


1,185,098





CASH FLOWS FROM FINANCING ACTIVITIES:




Proceeds from borrowings on senior credit facility

14,300,000


-

Repayment of borrowings on senior credit facility

(7,000,000)


(8,050,000)

Repayments of borrowings - insurance financing

(651,124)


(599,341)

Debt issuance costs

-


(323,593)

Common stock registration and offering costs

(64,050)


(15,087)

Treasury stock repurchases

(413,821)


(24,432)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

6,171,005


(9,012,453)





CHANGE IN CASH AND CASH EQUIVALENTS

2,408,281


(3,355,327)





CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

137,363


3,625,686





CASH AND CASH EQUIVALENTS AT END OF PERIOD

$    2,545,644


$     270,359





Supplemental disclosure of cash flow information:




Interest payments (net of interest capitalized)

$    1,324,950


$  1,133,385

Interest capitalized

$       133,772


$     208,310

Income tax refund

$                   -


$       20,699

Supplemental disclosure of significant non-cash activity:




(Increase) decrease in capital expenditures financed by accounts payable

$    3,922,933


$(3,291,386)

Common stock subscription receivable (net of $909,600 offering costs at closing)

$                   -


$  8,690,400

Other accrued offering expenses

$                   -


$     271,227

 

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SOURCE Yuma Energy, Inc.