What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 60 added, 56 removed, 96 unchanged (55% of the section changed)

4 unchanged sentences

Results of Operations

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

32 unchanged sentences

$ 0.98 $ 0.95 $ 0.96 $ 0.90

Oil and natural gas sales of $343.7 million increased by $164.2 million (91%) in the second quarter of 2021 as compared to $179.5 million for the second quarter of 2020.

The increase was primarily due to higher prices received for our oil and natural gas production as well as increased natural gas production.

Our natural gas production for the second quarter of 2021 was 124.1 billion cubic feet ("Bcf") (1.4 Bcf per day), which was sold at an average price of $2.59 per Mcf as compared to 116.5 Bcf (1.3 Bcf per day) sold at an average price of $1.48 per Mcf in the second quarter of 2020.

Oil production of 362 MBbls (3,978 Bbls per day) was sold at an average price of $61.25 per Bbl in the second quarter of 2021 as compared to 360 MBbls (3,956 Bbls per day) sold at an average price of $19.97 per Bbl in the second quarter of 2020.

Oil and natural gas sales of $684.2 million increased by $278.8 million (69%) for the six months ended June 30, 2021 compared to $405.4 million for the six months ended June 30, 2020, which was primarily due to higher prices received for our oil and natural gas production.

Our natural gas production for the first six months of 2021 was 237.4 Bcf (1.3 Bcf per day) was sold at an average price of $2.72 per Mcf as compared to 239.3 Bcf (1.3 Bcf per day) sold at an average price of $1.59 per Mcf in the first six months of 2020.

Oil production of 688 Mbbls (3,801 Bbls per day) was sold at an average price of $56.25 per Bbl in the first six months of 2021 as compared to 814 Mbbls (4,473 Bbls per day) sold at an average price of $31.72 per Bbl in the first six months of 2020.

Oil and natural gas sales of $511.2 million for the third quarter of 2021 increased by $333.2 million (187%) as compared to $178.0 million for the third quarter of 2020.

The increase was primarily due to higher prices received for our oil and natural gas production as well as higher natural gas production.

Our natural gas production for the third quarter of 2021 increased 26% to 128.9 billion cubic feet ("Bcf") (1.4 Bcf per day), and was sold at an average price of $3.79 per Mcf as compared to 102.6 Bcf (1.1 Bcf per day) sold at an average price of $1.64 per Mcf in the third quarter of 2020.

Oil production of 346 MBbls (3,761 Bbls per day) was sold at an average price of $66.11 per Bbl in the third quarter of 2021 as compared to 354 MBbls (3,851 Bbls per day) sold at an average price of $27.20 per Bbl in the third quarter of 2020.

Oil and natural gas sales of $1.2 billion increased by $611.9 million (105%) for the nine months ended September 30, 2021 compared to $583.4 million for the nine months ended September 30, 2020, due primarily to higher prices received for our oil and natural gas production.

Our natural gas production for the first nine months of 2021 was 366.3 Bcf (1.3 Bcf per day), which was sold at an average price of $3.10 per Mcf as compared to 341.8 Bcf (1.2 Bcf per day) sold at an average price of $1.60 per Mcf in the first nine months of 2020.

Oil production of 1,034 Mbbls (3,788 Bbls per day) was sold at an average price of $59.55 per Bbl in the first nine months of 2021 as compared to 1,168 Mbbls (4,263 Bbls per day) sold at an average price of $30.35 per Bbl in the first nine months of 2020.

We utilize natural gas and oil price derivative financial instruments to manage our exposure to changes in prices of natural gas and oil and to protect returns on investment from our drilling activities.

The following table presents our natural gas and oil prices before and after the effect of cash settlements of our derivative financial instruments:

Three Months Ended Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

8 unchanged sentences

Costs and Expenses –

Our production and ad valorem taxes in creased $0.6 million (6%) to $10.1 million for the second quarter of 2021 from $9.6 million in the second quarter of 2020.

Production and ad valorem taxes increased $1.8 million (10%) to $19.8 million for the first six months of 2021 from $18.0 million in the first six months of 2020.

The increase was primarily due to the higher oil and natural gas sales in 2021.

Gathering and transportation costs for the second quarter of 2021 increased $5.1 million (19%) to $31.7 million as compared to $26.6 million in the second quarter of 2020.

Gathering and transportation costs for the first six months of 2021 increased $6.2 million (11%) to $61.2 million as compared to $55.0 million for the first six months of 2020.

The increase is due primarily to higher average rates in 2021 in addition to the higher production in the second quarter of 2021.

Our lease operating expense of $26.0 million ($0.21 per Mcfe) for the second quarter of 2021 decreased $1.8 million (7%) from lease operating expense of $27.8 million ($0.24 per Mcfe) for the second quarter of 2020.

Our lease operating expense of $50.6 million ($0.21 per Mcfe) for the first six months of 2021 decreased $3.1 million (6%) from lease operating expense of $53.7 million ($0.22 per Mcfe) for the first six months of 2020.

The decrease in average per unit cost is related to the growth in our lower cost natural gas production where much of the operating costs are fixed in nature.

Depreciation, depletion and amortization ("DD&A") increased $18.1 million (18%) to $121.4 million in the second quarter of 2021 from $103.3 million in the second quarter of 2020.

Our DD&A per equivalent Mcf produced increased $0.09 (10%) to $0.96 per Mcfe for the three months ended June 30, 2021 from $0.87 per Mcfe for the three months ended June 30, 2020.

DD&A increased $16.8 million (8%) to $230.6 million in the first six months of 2021 from $213.8 million in the first six months of 2020.

Our DD&A per equivalent Mcf produced increased $0.07 (8%) to $0.95 per Mcfe for the first six months of 2021 from $0.88 per Mcfe for the first six months of 2020.

General and administrative expenses, which are reported net of overhead reimbursements, decreased to $7.9 million for the second quarter of 2021 from $8.3 million in the second quarter of 2020.

General and administrative expenses decreased to $15.9 million for the first six months of 2021 from $17.0 million in the first six months of 2020.

The decreases were primarily related to increased overhead reimbursements in 2021.

Our production and ad valorem taxes in creased $6.9 million (70%) to $16.7 million for the third quarter of 2021 from $9.8 million in the third quarter of 2020.

Production and ad valorem taxes increased $8.7 million (31%) to $36.5 million for the first nine months of 2021 from $27.8 million in the first nine months of 2020.

The increase was primarily related to the higher oil and natural gas prices in 2021.

Gathering and transportation costs for the third quarter of 2021 increased $13.0 million (58%) to $35.4 million as compared to $22.4 million in the third quarter of 2020.

Gathering and transportation costs for the first nine months of 2021 increased $19.2 million (25%) to $96.6 million as compared to $77.4 million for the first nine months of 2020.

The increase is due primarily to higher average rates and higher production in the third quarter and the first nine months of 2021.

Our lease operating expense of $26.6 million ($0.20 per Mcfe) for the third quarter of 2021 increased $1.2 million (5%) from lease operating expense of $25.4 million ($0.25 per Mcfe) for the third quarter of 2020.

Our lease operating expense of $77.2 million ($0.21 per Mcfe) for the first nine months of 2021 decreased $2.0 million (2%) from lease operating expense of $79.1 million ($0.23 per Mcfe) for the first nine months of 2020.

The decrease in average per unit cost is related to the growth in our lower cost natural gas production.

Depreciation, depletion and amortization ("DD&A") increased $29.7 million (30%) to $128.7 million in the third quarter of 2021 from $99.1 million in the third quarter of 2020 due to higher production and an increase in the average rate.

Our DD&A per equivalent Mcf produced increased $0.03 (3%) to $0.98 per Mcfe for the three months ended September 30, 2021 from $0.95 per Mcfe for the three months ended September 30, 2020.

DD&A increased $46.5 million (15%) to $359.3 million in the first nine months of 2021 from $312.8 million in the first nine months of 2020.

Our DD&A per equivalent Mcf produced increased $0.06 (7%) to $0.96 per Mcfe for the first nine months of 2021 from $0.90 per Mcfe for the first nine months of 2020.

General and administrative expenses, which are reported net of overhead reimbursements, decreased to $8.1 million for the third quarter of 2021 as compared to $9.0 million in the third quarter of 2020.

General and administrative expenses decreased to $24.0 million for the first nine months of 2021 from $26.0 million in the first nine months of 2020.

The decreases primarily resulted from higher overhead reimbursements that we received in 2021.

We use derivative financial instruments as part of our price risk management program to protect our capital investments.

During the three months ended June 30, 2021, we had net losses on derivative financial instruments of $224.0 million, as compared to net losses on derivative financial instruments of $12.3 million during the three months ended June 30, 2020.

Realized net losses from our oil and natural gas price risk management program were $18.8 million for the three months ended June 30, 2021 as compared to realized net gains of $53.2 million for the three months ended June 30, 2021.

Realized losses from our interest rate risk management program were $292 thousand for the three months ended June 30, 2021 as compared to net gains of $63 thousand for the three months ended June 30, 2020.

During the six months ended June 30, 2021, we had net losses on derivative financial instruments of $245.7 million, as compared to net gains on derivative financial instruments of $49.6 million during the the first six months of 2020.

Realized net losses from our oil and natural gas price risk management program were $27.3 million and net gains of $98.6 million for the six months ended June 30, 2021 and 2020, respectively.

Realized losses from our interest rate risk management program were $561 thousand for the six months ended June 30, 2021 as compared to net gains of $63 thousand for the six months ended June 30, 2020.

Interest expense was $56.9 million and $52.1 million for the three months ended June 30, 2021 and 2020, respectively.

Interest expense was $120.7 million and $104.9 million for the six months ended June 30, 2021 and 2020, respectively.

The increase in interest expense is due primarily to the issuance of additional 9.75% senior notes in 2020.

Income taxes for the three months ended June 30, 2021 and 2020 were a benefit of $68.2 million and $11.4 million, respectively.

Income taxes for the six months ended June 30, 2021 and 2020 were a benefit of $98.1 million and $0.1 million, respectively.

The benefit for income taxes for the three months and six months ended June 30, 2021 reflect an effective tax rate of 27.5% and 23.8%, respectively.

The benefit for income taxes for the three months and six months ended June 30, 2020 reflect an effective tax rate of 18.7% and 0.7%, respectively.

The difference between the federal statutory rate of 21% and our effective rate is primarily due to the impact of state income taxes, including changes to Louisiana state tax law enacted in the second quarter of 2021.

We reported net loss available to common stockholders of $184.1 million or $0.80 per share, for the three months ended June 30, 2021 due primarily to the $224.0 million in losses from derivative financial instruments and the $114.1 million loss on early retirement of our 9.75% senior notes.

Income from operations was $146.5 million and we had interest expense of $56.9 million and $4.4 million in preferred stock dividends.

We reported net loss available to common stockholders of $60.0 million or $0.29 per share for the three months ended June 30, 2020.

In the first six months of 2021, we reported net loss available to common stockholders of $322.5 million or $1.39 per share.

Our net loss during this period includes income from operations of $306.2 million, which were offset by losses on derivative financial instruments of $245.7 million, interest expense of $120.7 million and $352.6 million in losses on early retirement of debt.

We reported net loss of $30.0 million or $0.15 per share for the six months ended June 30, 2020.

During the quarter ended September 30, 2021, we had substantial losses related to our derivative financial instruments of $510.3 million, as compared to net losses on derivative financial instruments of $121.6 million during the quarter ended September 30, 2020.

Realized net losses from our oil and natural gas price risk management program were $117.1 million for the quarter ended September 30, 2020 as compared to realized net gains of $34.2 million for the quarter ended September 30, 2021.

During the nine months ended September 30, 2021, we had total net losses on derivative financial instruments of $756.0 million, as compared to net losses on derivative financial instruments of $72.0 million during the the first nine months of 2020.

Realized net losses from our oil and natural gas price risk management program were $144.4 million and net gains of $132.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Interest expense was $50.0 million and $63.9 million for the quarter ended September 30, 2021 and 2020, respectively.

The 22% decrease in interest expense is due primarily to the retirement of our 9.75% and 7.50% senior notes

during the first six months of 2021.

Interest expense was $170.6 million and $168.8 million for the nine months ended September 30, 2021 and 2020, respectively.

Income taxes for the quarter ended September 30, 2021 and 2020 were a provision of $24.0 million and a benefit of $46.1 million, respectively.

Income taxes for the nine months ended September 30, 2021 and 2020 were a benefit of $74.2 million and $46.2 million, respectively.

The provision and benefit for income taxes for the three months and nine months ended September 30, 2021 reflect an effective tax rate of (9.1)% and 11.0%, respectively.

The income tax provision for the three months ended September 30, 2021 is attributable to revisions to the estimated future utilization of federal and state net operating loss carryforwards resulting from the loss from derivative financial instruments that was recognized in the period.

The benefit for income taxes for the three months and nine months ended September 30, 2020 reflect an effective tax rate of 26.7% and 25.6%, respectively.

The difference between the federal statutory rate of 21% and our effective rate is primarily due to the increased valuation allowances discussed above and the impact of state income taxes.

We reported net loss available to common stockholders of $292.7 million or $1.26 per share, for the quarter ended September 30, 2021 which was caused by the $510.3 million net loss from derivative financial instruments.

Income from operations for the third quarter of 2021 was $295.7 million and we had interest expense of $50.0 million and $4.4 million in preferred stock dividends.

We reported net loss available to common stockholders of $130.9 million or $0.57 per share for the three months ended September 30, 2020.

In the first nine months of 2021, we reported net loss available to common stockholders of $615.2 million or $2.66 per share.

Our income from operations for the first nine months of 2021 was $602.0 million, which was offset by losses on derivative financial instruments of $756.0 million, $352.6 million in losses on early retirement of debt and interest expense of $170.6 million.

We reported net loss of $160.9 million or $0.77 per share for the nine months ended September 30, 2020.

Liquidity and Capital Resources

Funding for our activities has historically been provided by our operating cash flow, debt or equity financings or proceeds from asset sales.

For the six months ended June 30, 2021, we generated $385.6 million in cash flow from operating activities as compared to $266.1 million in cash flow from operating activities for the six months ended June 30, 2020.

For the nine months ended September 30, 2021, we generated $618.6 million in cash flow from operating activities as compared to $390.0 million in cash flow from operating activities for the nine months ended September 30, 2020.

The following table summarizes our capital expenditure activity:

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

5 unchanged sentences

Other development costs

28,455 26,463

Total capital expenditures

$ 508,422 $ 315,666

We drilled 50 (34.4 net) wells and completed 35 (24.5 net) Haynesville shale wells during the first six months of 2021.

We expect to spend an additional $200 million to $240 million in the remaining six months of 2021 to drill 25 (21.7 net) additional wells, to complete 29 (24.3 net) wells and for other development activity.

We drilled 81 (46.9 net) wells and completed 68 (47.2 net) Haynesville shale wells during the first nine months of 2021.

We expect to spend an additional $115 million to $135 million in the remaining three months of 2021 to drill 9 (7.4 net) additional wells, to complete 10 (8.8 net) wells and for other development activity.

We expect to fund our future development and exploration activities with future operating cash flow.

5 unchanged sentences

We intend to use our cash flows from operations, borrowings under our bank credit facility, or other debt or equity financings to the extent available, to finance such acquisitions.

The availability and attractiveness of these sources of financing will depend upon a number of factors, some of which will relate to our financial condition and performance and some of which will be beyond our control, such as prevailing interest rates, oil and natural gas prices and other market conditions.

The availability and attractiveness of these sources of financing will depend upon a number of factors, some of which will relate to our financial condition and performance and some of which will be

beyond our control, such as prevailing interest rates, oil and natural gas prices and other market conditions.

Lack of access to the debt or equity markets due to general economic conditions could impede our ability to complete acquisitions.

5 unchanged sentences

On June 29, 2021, we completed the redemption of all outstanding 2026 Notes for $978.6 million, which included premiums paid over face value of $74.0 million and accrued interest of $31.7 million.

As a result of the early retirement of the senior notes repurchased in the tender offer and the redemption of the 2026 Notes, we recognized a loss of $114.1 million and $352.6 million on early retirement of debt for the three months and six months ended June 30, 2021, respectively.

At June 30, 2021, we had $475.0 million outstanding under our bank credit facility with a $1.4 billion committed borrowing base, which is re-determined on a semi-annual basis and upon the occurrence of certain other events, and matures on July 16, 2024.

The borrowing base was redetermined at $1.4 billion on April 16, 2021.

As a result of the early retirement of the senior notes repurchased in the tender offer and the redemption of the 2026 Notes, we recognized a loss of $352.6 million on early retirement of debt for the nine months ended September 30, 2021.

At September 30, 2021, we had $425.0 million outstanding under our bank credit facility with a $1.4 billion committed borrowing base, which is re-determined on a semi-annual basis and upon the occurrence of certain other events, and matures on July 16, 2024.

The borrowing base was redetermined at $1.4 billion on October 22, 2021.

Borrowings under the bank credit facility are secured by substantially all of our assets and those of our subsidiaries and bear interest at our option, at either LIBOR plus 2.25% to 3.25% or a base rate plus 1.25% to 2.25%, in each case depending on the utilization of the borrowing base.

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The only financial covenants are the maintenance of a leverage ratio of less than 4.0 to 1.0 and an adjusted current ratio of at least 1.0 to 1.0.

We were in compliance with the covenants as of June 30, 2021.

We were in compliance with the covenants as of September 30, 2021.

In April 2021, we entered into a well stimulation agreement that extends to 2024 for exclusive use of a natural gas powered pressure pumping fleet.

The minimum commitment under this contract is $19.2 million per year from 2022 through 2024.

At June 30, 2021, we had $946.1 million in U.S.

On October 6, 2021, we entered into an agreement to sell certain wells producing from the Bakken shale for $154 million in cash, subject to adjustment and customary closing conditions.

The sale is expected to close in the fourth quarter of 2021 and has an effective date of October 1, 2021.

At September 30, 2021, we had $960.3 million in U.S.

federal net operating loss ("NOL") carryforwards and $1.5 billion in certain state NOL carryforwards.

5 unchanged sentences

NOLs that exceed the Section 382 limitation in any year continue to be allowed as carryforwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year.

NOLs incurred prior to 2018 generally have a 20-year life until they expire.

incurred prior to 2018 generally have a 20-year life until they expire.

NOLs generated in 2018 and after would be carried forward indefinitely.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis