Alta Mesa Announces Third Quarter 2018 Financial and Operational Results

Houston, Texas, UNITED STATES

HOUSTON, Nov. 13, 2018 (GLOBE NEWSWIRE) -- Alta Mesa Resources, Inc., (NASDAQ: AMR, “Alta Mesa Resources”, “AMR” or the “Company”) today announced third quarter 2018 unaudited consolidated financial results and certain financial and operational results for its subsidiaries, Alta Mesa Holdings, LP (“Alta Mesa Upstream” or “AMH”) and Kingfisher Midstream, LLC (“Kingfisher Midstream” or “KFM”). A conference call to discuss these results is scheduled for today at 4 p.m. Central time (888-347-8149).


  • Q3-18 net production of approximately 33,400 BOE per day (50% oil, 72% liquids), up over 30% from Q2-18, September average was approximately 36,800 BOE per day
  • Oil volumes for Q3-18 were approximately 16,700 Bbls per day, up over 35% from Q2-18
  • Production guidance for full-year 2018 reaffirmed at 29,000 to 31,000 BOE per day, 2018 exit rate guidance reaffirmed at 38,000 to 40,000 BOE per day
  • Kingfisher Midstream Q3-18 system gas volumes of 116 MMcf per day, up over 20% from Q2-18
  • Kingfisher Midstream EBITDA guidance for Q4-18 of $14 to $16 million
  • Alta Mesa Resources completed the transfer of the produced water business from Alta Mesa Upstream to Kingfisher Midstream, effective Oct 1, 2018
  • Alta Mesa Resources repurchased and retired approximately 3.1 million of its Class A common shares under its stock buy-back program at a weighted average price of $4.76 per share

Hal Chappelle, Alta Mesa Resources’ President and Chief Executive Officer, stated, “We have continued to execute at a high level of excellence in the field, bringing over 50 wells on production this quarter while controlling capital costs.  With over 20 new multi-well patterns being brought onto production in 2018, we have significantly expanded our understanding of the optimal development strategies for our asset base.  We are leveraging this expanded understanding to continue to refine our development plans for 2019 and beyond with a focus on maximizing capital efficiency and shareholder returns.”

Third Quarter 2018 Financial Summary

Net income, attributable to Alta Mesa Resources’ stockholders, during the third quarter of 2018 was $7.1 million or $0.04 per basic and diluted share.  Adjusted earnings before interest, income taxes, depreciation, depletion and amortization and exploration costs and other items ("Adjusted EBITDAX") was $83.8 million for the third quarter of 2018. Alta Mesa Upstream had a net income during the third quarter 2018 of $17.8 million, and Adjusted EBITDAX of $73.4 million. Kingfisher Midstream had a net income during the third quarter of $2.1 million, and adjusted earnings before interest, income taxes, depreciation, depletion and amortization and other items ("Adjusted EBITDA") of $10.9 million. For the third quarter of 2018, the produced water business remains in the Alta Mesa Upstream results. Adjusted EBITDAX and Adjusted EBITDA are non-GAAP financial measures and are described in the attached table under “Non-GAAP Financial Information and Reconciliation.”

Alta Mesa Upstream Operational Results

Total production for the third quarter of 2018 was 3,077 MBOE, an average of 33,400 BOE per day, up over 30% from the second quarter of 2018. September 2018 average production was 36,800 BOE per day which is up by more than 80% from the 2017 exit rate. Alta Mesa Upstream is reaffirming its previously published full year 2018 production guidance of 29,000 to 31,000 BOE per day and reaffirms its expected 2018 production exit rate of 38,000 to 40,000 BOE per day. 

In the third quarter, Alta Mesa Upstream had eight rigs and four frac crews working to complete the drilling of 46 wells and bring 53 wells onto production.  Two of the wells brought on production were funded under the joint development agreement with BCE-STACK Development LLC. In 2018, through the end of the third quarter, Alta Mesa Upstream has drilled 128 horizontal wells in the STACK.

Kingfisher Midstream and Produced Water Business Update

Kingfisher Midstream’s system gas volumes for the third quarter of 2018 were 10.7 BCF, an average of 116 MMcf per day, up over 20% from the second quarter of 2018. September 2018 system gas volumes averaged 123 MMcf per day compared to 82 MMcf per day at the time of the business combination in early February 2018.

Alta Mesa Resources has completed the transfer of the produced water business from Alta Mesa Upstream to Kingfisher Midstream for a value of approximately $90 million, subject to closing adjustments and will be funded under the Kingfisher Midstream revolving credit facility. The transaction closed November 9, 2018 with an effective date of October 1, 2018.  Produced water volumes for the third quarter 2018 averaged approximately 75,000 barrels of water per day. This purpose-built and expanding system currently consists of over 200 miles of permanently installed gathering pipeline and 20 produced water disposal wells. Concurrently, Alta Mesa Upstream entered a new 15-year produced water gathering and disposal agreement with Kingfisher Midstream that includes all current and future Alta Mesa Upstream acreage in select counties including Kingfisher and Major county. 

Craig Collins, Chief Operating Officer of Kingfisher Midstream, stated, “We are excited to mark a strategic milestone for Kingfisher Midstream by having recently completed the transfer of the produced water business from Alta Mesa Upstream. The produced water business further supports our efforts to provide differentiated services at competitive rates that will establish long term, multi-stream, fee-based growth for our midstream business.” Collins added, "Continuing to execute on growing volumes in all three product lines, gas, oil and produced water, is a key focus as we exit 2018 and begin 2019.”

Updated 2018 Guidance for Kingfisher Midstream

Kingfisher Midstream issued EBITDA guidance of $14 to $16 million for Q4-2018 and updated full year 2018 EBITDA guidance to $36 to $38 million. These amounts include revenue generated in Q4-2018 from the newly transferred produced water business as if the business was owned on October 1, 2018. This implies annualized Q4-2018 Kingfisher Midstream EBITDA of $56 to $64 million.

Updated Full Year
2018 Guidance
Average Rig Count  
Alta Mesa Upstream~9~8
Third Parties≤ 3≤ 4
Average Gas Volumes (MMcf/d)  
Alta Mesa Upstream90 – 10080 – 85
Third Parties15 – 2515 - 25
Average Crude Oil Volumes (Bbls/d)6,500 – 7,500~5,000
Average Water Volumes (Bbls/d)180,000 – 90,00080,000 – 90,000
Plant Operating Expenses($/MMbtu)$0.25 - $0.30$0.25 - $0.30
Gathering & Processing Expense ($mm)~$3~$11
Water Operating Expense ($/Bbl)~$0.30~$0.30
G&A Expense ($mm)~$4.5~$14
One-Time Expenses Addback2-($2)
Adjusted EBITDA ($mm)3$14 - $16$36 - $38
Capex ($mm)4$45 - $55$80 - $90

            Note: Full-year 2018 represents the period from Feb 9, 2018 to Dec 31, 2018

  1. Water volumes shown for Full Year 2018 Average are the Average for Q4-2018
  2. One-time expense addback includes transition services agreement payments made in Q1 and Q2
  3. Adjusted EBITDA includes full Q4 2018 EBITDA from produced water business, as if business was owned on Oct 1, 2018
  4. Capex does not include the $90 million purchase price for produced water. Capex excludes FY 2018 funding for Cimarron Express of $16 million that is accounted as an equity investment

Share Repurchase Program Update

The Company repurchased and retired approximately 3.1 million shares of Class A common stock at a weighted average price of $4.76 per share under the previously announced $50 million share repurchase program. Repurchases are done at the company’s discretion in accordance with applicable securities laws from time to time in open market or private transactions.

Management Update

The Company today announced that Michael A. McCabe, Alta Mesa Vice President, Chief Financial Officer and Assistant Secretary is retiring from the Company.  To help ensure an orderly transition, Mr. McCabe will remain with Alta Mesa while the company conducts a search to fill the Chief Financial Officer position.

Mr. McCabe joined the company twelve years ago and has served as the Chief Financial Officer during a transformational period of growth from a diversified private upstream company to a focused pure play STACK company with integrated upstream and midstream operations.  Hal Chappelle, Alta Mesa Resources’ President and Chief Executive Officer, stated, “On behalf of the entire Board, management team and Alta Mesa employees I want to thank Mike for his dedication and valuable contributions during his more than a decade at Alta Mesa. Mike has played a significant role in the evolution of the Company and its preparation for becoming public via the business combination earlier this year. I am deeply appreciative that Mike will remain with the Company to help facilitate a smooth leadership transition and wish him all the best in his retirement.”

“It has been a privilege to work alongside the talented and dedicated Alta Mesa team,” said McCabe. “I am proud of the team we have built and the asset base we have assembled.  The team and assets are well positioned to deliver capital efficient growth for years to come.  I am committed to working with Hal and the full management team to ensure a smooth transition.”

Conference Call Information

Alta Mesa Resources invites you to listen to its conference call which will discuss its financial and operational results at 4:00 p.m., Central time, on Tuesday, November 13, 2018. If you wish to participate in this conference call, dial 888-347-8149 (toll free in US/Canada) or 412-902-4228 (for International calls), five to ten minutes before the scheduled start time. A webcast of the call and any related materials will be available on Alta Mesa Resources’ website at Additionally, a replay of the conference call will be available for one week following the live broadcast by dialing 844-512-2921 (toll free in US/Canada) or 412-317-6671 (International calls), and referencing Conference ID #10125708.

Alta Mesa Resources, Inc., is an independent energy company focused on the development and acquisition of unconventional oil and natural gas reserves in the Anadarko Basin in Oklahoma, and through Kingfisher Midstream, LLC, provides best-in-class midstream energy services, including crude oil, gas and produced water gathering, processing and marketing to producers in the STACK play. Alta Mesa Resources, Inc. is headquartered in Houston, Texas.

Safe Harbor Statement and Disclaimer 
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, regarding Alta Mesa Resources’ strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this press release, the words “could”, “should”, “will”, “play”, “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on Alta Mesa Resources’ current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. Forward-looking statements may include statements about Alta Mesa Resources’: business strategy; financial strategy; future oil and natural gas prices; timing and amount of future production of oil and natural gas; future drilling plans; production and financial guidance; and plans, objectives, expectations and intentions contained in this press release that are not historical. Alta Mesa Resources cautions you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond its control, incident to the exploration for and development and production of oil and natural gas. These risks include, but are not limited to, commodity price volatility, low prices for oil and/or natural gas, global economic conditions, inflation, increased operating cost, lack of availability of drilling and production equipment and services, environmental risks, weather risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating oil and natural gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and other risks. Information concerning these and other factors can be found in Alta Mesa Resources' filings with the SEC, including its Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on the SEC's web site at Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, Alta Mesa Resources’ actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we may issue. Except as otherwise required by applicable law, Alta Mesa Resources disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this press release.

FOR MORE INFORMATION CONTACT: Lance L. Weaver (281) 943-5597 

(in thousands, except per share data)
 Successor  Predecessor Successor  Predecessor
 Three  Three February 9, 2018  January 1, 2018 Nine
 Months Ended  Months Ended Through  Through Months Ended
 Sept 30, 2018  Sept 30, 2017 Sept 30, 2018  Feb 8, 2018 Sept 30, 2017
Oil$107,253   $44,201  $222,822   $30,972  $133,489 
Natural gas11,959   9,583  25,149   4,276  29,816 
Natural gas liquids13,880   7,548  28,835   4,000  21,201 
Product sales22,676     50,650      
Gathering and processing revenue8,102     18,586      
Other revenues1,011   1,792  3,795   888  5,005 
Total operating revenues164,881   63,124  349,837   40,136  189,511 
Gain (loss) on sale of assets and other(18)    5,898      
Gain on acquisition of oil and gas properties   5,267       5,267 
Gain (loss) on derivative contracts(11,212)  (10,468) (63,077)  7,298  38,024 
Total operating revenues and other153,651   57,923  292,658   47,434  232,802 
Lease operating expense16,351   10,407  37,347   4,485  32,897 
Marketing and transportation expense2,847   8,314  6,041   3,725  20,486 
Plant operating expense4,507     8,407      
Product expense22,830     50,433      
Gathering and processing expense2,334     7,912      
Production taxes6,311   1,262  10,332   953  3,712 
Workover expense1,065   1,441  2,643   423  3,131 
Exploration expense1,029   3,649  14,067   3,633  11,888 
Depreciation, depletion and amortization expense52,877   24,159  102,227   11,784  63,247 
Impairment expense          1,188 
Accretion expense226   108  489   39  234 
General and administrative expense11,902   17,445  68,915   24,352  35,474 
Total operating expenses122,279   66,785  308,813   49,394  172,257 
INCOME (LOSS) FROM OPERATIONS31,372   (8,862) (16,155)  (1,960) 60,545 
Interest expense(12,348)  (13,545) (29,571)  (5,511) (38,165)
Interest income and other357   244  1,727   172  792 
Total other income (expense), net(11,991)  (13,301) (27,844)  (5,339) (37,373)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES19,381   (22,163) (43,999)  (7,299) 23,172 
Income tax provision (benefit)1,626     (5,865)    285 
INCOME (LOSS) FROM CONTINUING OPERATIONS17,755   (22,163) (38,134)  (7,299) 22,887 
Loss from discontinued operations, net of tax   (2,041)    (7,593) (37,490)
NET INCOME (LOSS)17,755   (24,204) (38,134)  (14,892) (14,603)
Net income (loss) attributable to non-controlling interest10,620     (25,590)     
NET INCOME (LOSS) ATTRIBUTABLE TO ALTA MESA RESOURCES, INC. STOCKHOLDERS$7,135   $(24,204) $(12,544)  $(14,892) $(14,603)
Basic$0.04     $(0.07)     
Diluted$0.04     $(0.08)     

(in thousands, except shares and per share data)
Successor  Predecessor
30, 2018
31, 2017
Cash and cash equivalents$32,185   $3,660 
Restricted cash872   1,269 
Accounts receivable, net122,828   76,161 
Other receivables250   1,388 
Receivables due from related party15,395   790 
Note receivable due from related party1,642    
Prepaid expenses and other current assets3,883   2,932 
Current assets — discontinued operations   5,195 
Derivative financial instruments   216 
Total current assets177,055   91,611 
Oil and natural gas properties, successful efforts method, net2,697,757   894,630 
Other property, plant and equipment, net401,424   32,140 
Total property, plant and equipment, net3,099,181   926,770 
Equity method investment9,338    
Deferred financing costs, net3,377   1,787 
Notes receivable due from related party11,492   12,369 
Intangible assets, net403,552    
Deposits and other long-term assets89   9,067 
Non-current assets — discontinued operations   43,785 
Deferred tax asset9,077    
Derivative financial instruments   8 
Total other assets1,136,823   67,016 
TOTAL ASSETS$4,413,059   $1,085,397 

 Successor  Predecessor
30, 2018
31, 2017
Accounts payable and accrued liabilities$240,431   $170,489 
Accounts payable — affiliate   5,476 
Advances from non-operators9,233   5,502 
Advances from related party16,917   23,390 
Asset retirement obligations1,300   69 
Current liabilities — discontinued operations   15,419 
Derivative financial instruments34,396   19,303 
Total current liabilities302,277   239,648 
Asset retirement obligations, net of current portion9,169   10,400 
Long-term debt, net676,354   607,440 
Noncurrent liabilities — discontinued operations   66,862 
Derivative financial instruments7,078   1,114 
Deferred tax liability4,893    
Other long-term liabilities5   5,488 
Total long-term liabilities697,499   691,304 
TOTAL LIABILITIES999,776   930,952 
PREFERRED STOCK, $0.0001 par value    
Class A: 1,000,000 shares authorized; 3 shares issued and outstanding    
Class B: 1,000,000 shares authorized; 1 share issued and outstanding    
Commitments and Contingencies    
Common stock, $0.0001 par value    
Class A: 1,200,000,000 shares authorized; 175,957,183 shares issued and outstanding18    
Class C: 280,000,000 shares authorized; 204,921,888 shares issued and outstanding20    
Additional paid in capital1,472,570    
Accumulated deficit(20,658)   
Total stockholders’ equity/partners’ capital1,451,950   154,445 
Noncontrolling interest1,961,333    
Total equity3,413,283   154,445 

(in thousands)
 Successor  Predecessor
 Feb 9, 2018
Sept 30, 2018
  Jan 1, 2018
Feb 8, 2018
 Nine Months
Sept 30, 2017
Net loss$(38,134)  $(14,892) $(14,603)
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation, depletion and amortization expense102,227   12,414  80,082 
Impairment expense   5,560  29,206 
Accretion expense489   140  1,447 
Amortization of deferred financing costs339   171  2,205 
Amortization of debt premium(3,281)     
Equity-based compensation expense8,333      
Dry hole expense   (45) 2,447 
Expired leases10,658   1,250  8,394 
(Gain) loss on derivative contracts63,077   (7,298) (38,024)
Cash settlements of derivative contracts(32,836)  (1,661) 1,775 
Premium paid on derivative contracts     (520)
Interest converted into debt   103  904 
Interest added to notes receivable due from related party(680)  (85) (619)
Deferred tax benefit(5,082)     
Loss on sale of assets and other81   1,923   
Gain on acquisition of oil and gas properties     (6,893)
Impact on cash from changes in assets and liabilities:      
Accounts receivable(16,225)  (20,895) (33,649)
Other receivables972   (9,887) 7,382 
Receivables due from related party(14,488)  (117) 169 
Prepaid expenses and other non-current assets8,366   9,970  (9,938)
Advances from related party(30,589)  24,116  5,266 
Settlement of asset retirement obligation(1,249)  (63) (6,083)
Accounts payable, accrued liabilities, and other liabilities(49,472)  25,815  27,308 
Capital expenditures for property, plant and equipment(523,645)  (38,096) (244,308)
Acquisitions, net of cash acquired(791,819)    (55,236)
Proceeds withdrawn from Trust Account1,042,742      
Investment in equity affiliate and other, net(9,326)    (1,515)
NET CASH USED IN INVESTING ACTIVITIES(282,048)  (38,096) (301,059)
Proceeds from long-term debt162,500   60,000  286,065 
Repayments of long-term debt(193,565)  (43,000) (251,622)
Additions to deferred financing costs(3,716)    (220)
Purchase and retirement of Class A common shares(14,750)     
Capital distributions   (68)  
Capital contributions     207,875 
Proceeds from issuance of Class A shares400,000      
Repayment of sponsor note(2,000)     
Repayment of deferred underwriting compensation(36,225)     
Redemption of Class A common shares(33)     
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period388   4,990  7,618 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period$33,057   $10,345  $4,913 

*Non-GAAP Financial Information and Reconciliation

Adjusted EBITDAX and Adjusted EBITDA are non-GAAP financial measures for AMR, AMH and Kingfisher Midstream, respectively, and are used by management and external users of our consolidated financial statements.  We define Adjusted EBITDA as net income (loss) before interest expense, depreciation and amortization, accretion of asset retirement obligations, tax expense, the non-cash gain (loss) on sale of assets, the non-cash portion of gain (loss) on oil, natural gas and natural gas liquids derivative contracts, and other items. We define Adjusted EBITDAX as net income (loss) before interest expense, exploration expense, depletion, depreciation and amortization, impairment of oil and natural gas properties, accretion of asset retirement obligations, tax expense, the non-cash gain (loss) on sale of assets, the non-cash portion of gain (loss) on oil, natural gas and natural gas liquids derivative contracts, and other items. The Company’s management believes Adjusted EBITDAX and Adjusted EBITDA are useful because it allows external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, to more effectively evaluate our operating performance, compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure and because it highlights trends in our business that may not otherwise be apparent when relying solely on GAAP measures. Adjusted EBITDAX and Adjusted EBITDA are not measurements of AMR, AMH and/or Kingfisher Midstream’s financial performance under GAAP, and should not be considered as an alternative to net income (loss), operating income (loss) or any other performance measure derived in accordance with GAAP or as an alternative to net cash provided by operating activities as a measure of AMR’s and AMH’s profitability or liquidity. Adjusted EBITDAX and Adjusted EBITDA have significant limitations, including that they do not reflect AMR’s, AMH’s and/or Kingfisher Midstream’s cash requirements for capital expenditures, contractual commitments, working capital or debt service. In addition, the presentation of Adjusted EBITDAX and Adjusted EBITDA used herein may not be comparable to similarly titled measures in other companies’ reports, limiting its usefulness as a comparative measure. The following tables set forth a reconciliation of net income (loss) as determined in accordance with GAAP to Adjusted EBITDAX for the periods indicated (unaudited in thousands):

EBITDA & EBITDAX CalculationSuccessor 
Three Months Ended Sep 30, 2018
Feb 9 - Sep 30, 2018
Net income (loss)$7,135 $17,844 $2,066$(12,544)$(39,204)$(2,847)
Net income (loss) attributable to noncontrolling interest 10,620  -  - (25,590) -  - 
Taxes 1,626  -  - (5,865) 7  - 
Interest 12,348  11,008  1,340 29,571  26,565  3,006 
Loss on sale of assets and other 18  18  - 81  81  - 
Loss on derivative contracts 11,212  11,212  - 63,077  63,077  - 
Settlements of derivative contracts (13,867) (13,867) - (32,836) (32,836) - 
Depreciation, depletion & amortization expense 52,877  45,623  7,254 102,227  83,068  19,159 
Accretion expense 226  226  - 489  489  - 
Stock compensation expense 604  325  277 8,333  6,714  784 
EBITDA 82,799  72,389  10,937 126,943  107,961  20,102 
Exploration expense 1,029  1,029  - 14,067  14,067  - 
EBITDAX 83,828  73,418  10,937 141,010  122,028  20,102 
Non-recurring business combination expense -  -  - 25,734  25,734  - 
Adjusted EBITDAX$83,828 $73,418 $10,937$166,744 $147,762 $20,102 

*Successor Company and Period:

The financial statements and certain footnote presentations separate the Company’s presentations into two distinct periods, the period before the consummation of the Business Combination, which is from January 1, 2018 to February 8, 2018 (“2018 Predecessor Period”) and the period after the consummation of the Business Combination, which is from February 9, 2018 to September 30, 2018 (“Successor Period”), to indicate the application of the different basis of accounting between the periods presented.  The three months ended September 30, 2017 is referred to as the “2017 Predecessor Period”.  Alta Mesa Upstream is the “Predecessor” for periods prior to the Business Combination, which do not include the consolidation of the Company and Kingfisher Midstream.  For the periods after the Business Combination, Alta Mesa Resources, including the consolidation of Alta Mesa Upstream and Kingfisher Midstream, is the “Successor”.