What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-04 · 60 added, 57 removed, 117 unchanged (50% of the section changed)

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

28 unchanged sentences

Lease operating $ 0.22 $ 0.20 $ 0.22 $ 0.21

Oil and natural gas sales of $861.3 million for the second quarter of 2022 increased by $517.6 million (151%) as compared to $343.7 million for the second quarter of 2021.

Oil and natural gas sales of $996.9 million for the third quarter of 2022 increased by $485.7 million (95%) as compared to $511.2 million for the third quarter of 2021.

The increase was primarily due to higher prices received for our natural gas production.

Our natural gas production for the second quarter of 2022 was 124.0 billion cubic feet ("Bcf") (1.4 Bcf per day), and was sold at an average price of $6.93 per Mcf as compared to 124.1 Bcf (1.4 Bcf per day) sold at an average price of $2.59 per Mcf in the second quarter of 2021.

Our natural gas production for the third quarter of 2022 was 128.9 billion cubic feet ("Bcf") (1.4 Bcf per day), and was sold at an average price of $7.72 per Mcf.

Our natural gas production for the third quarter of 2021 was also 128.9 Bcf (1.4 Bcf per day) but was sold at an average price of $3.79 per Mcf.

In October 2021, we sold our Bakken shale properties, which accounted for most of our oil production.

Oil and natural gas sales of $1.4 billion for the six months ended June 30, 2022 increased by $702.0 million (103%) as compared to $684.2 million for the six months ended June 30, 2021, which also was primarily due to higher prices received for our natural gas production.

Our natural gas production for the first six months of 2022 increased 1% to 238.9 Bcf (1.3 Bcf per day), and was sold at an average price of $5.79 per Mcf as compared to 237.4 Bcf (1.3 Bcf per day) sold at an average price of $2.72 in the first six months of 2021.

Oil and natural gas sales of $2.4 billion for the nine months ended September 30, 2022 increased by $1.2 billion (99%) as compared to $1.2 billion for the nine months ended September 30, 2021, which also was primarily due to higher prices received for our natural gas production.

Our natural gas production for the first nine months of 2022 was 367.8 Bcf (1.3 Bcf per day), and was sold at an average price of $6.46 per Mcf as compared to 366.3 Bcf (1.3 Bcf per day) sold at an average price of $3.10 in the first nine months of 2021.

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 June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

7 unchanged sentences

Price per Bbl, including cash settlements on derivative financial instruments $ 92.19 $ 58.58 $ 95.82 $ 54.24

Gas service revenues of $84.9 million and $129.5 million for the three months and six months ended June 30, 2022, respectively, included sales of natural gas purchased from unaffiliated third parties for resale and fees received from unaffiliated third parties for natural gas transportation and treating services.

Gas service revenues of $193.1 million and $322.6 million for the three months and nine months ended September 30, 2022, respectively, included sales of natural gas purchased from unaffiliated third parties for resale and fees received from unaffiliated third parties for natural gas transportation and treating services.

Costs and Expenses –

Our production and ad valorem taxes increased $11.6 million (114%) to $21.7 million for the second quarter of 2022 from $10.1 million in the second quarter of 2021.

Production and ad valorem taxes increased $15.8 million (80%) to $35.5 million for the first six months of 2022 from $19.8 million in the first six months of 2021.

The increase was primarily related to higher natural gas sales in 2022.

Gathering and transportation costs for the second quarter of 2022 increased $5.2 million (16%) to $37.0 million as compared to $31.7 million in the second quarter of 2021.

Gathering and transportation costs for the first six months of 2022 increased $7.9 million (13%) to $69.1 million as compared to $61.2 million for the first six months of 2021.

The increase is due to additional transportation costs related to our operated natural gas production.

Our lease operating expense of $25.1 million ($0.20 per Mcfe) for the second quarter of 2022 decreased $0.9 million (4%) from lease operating expense of $26.0 million ($0.21 per Mcfe) for the second quarter of 2021.

Lease operating expense of $51.3 million ($0.21 per Mcfe) for the first six months of 2022 increased $0.7 million (1%) from lease operating expense of $50.6 million ($0.21 per Mcfe) for the first six months of 2021.

Gas service expenses were $82.8 million and $123.5 million for the three months and six months ended June 30, 2022 and include the cost of unaffiliated third party natural gas purchased for resale and the operating expenses of the pipeline and natural gas treating plant acquired in April 2022.

Depreciation, depletion and amortization ("DD&A") decreased $2.2 million (2%) to $119.2 million in the second quarter of 2022 from $121.4 million in the second quarter of 2021.

Our DD&A per equivalent Mcf produced was $0.96 per Mcfe for both the quarter ended June 30, 2022 and 2021.

DD&A decreased $4.6 million (2%) to $225.9 million in the first six months of 2022 from $230.6 million in the first six months of 2021.

Our DD&A per equivalent Mcf produced decreased $0.01 to $0.94 per Mcfe for the first six months of 2022 from $0.95 per Mcfe for the first six months of 2021.

General and administrative expenses, which are reported net of overhead reimbursements, increased to $9.1 million for the second quarter of 2022 as compared to $7.9 million in the second quarter of 2021.

General and administrative expenses increased to $17.3 million for the first six months of 2022 from $15.9 million in the first six months of 2021.

The increases were primarily related to higher compensation expense.

Our production and ad valorem taxes increased $7.9 million (47%) to $24.5 million for the third quarter of 2022 from $16.7 million in the third quarter of 2021.

Production and ad valorem taxes increased $23.6 million (65%) to $60.1 million for the first nine months of 2022 from $36.5 million in the first nine months of 2021.

The increase was primarily related to higher natural gas sales and higher production tax rates enacted in the state of Louisiana during 2022.

Gathering and transportation costs for the third quarter of 2022 increased $9.3 million (26%) to $44.7 million as compared to $35.4 million in the third quarter of 2021.

Gathering and transportation costs for the first nine months of 2022 increased $17.2 million (18%) to $113.8 million as compared to $96.6 million for the first nine months of 2021.

The increase is due to higher average transportation rates including higher value of fuel used to transport our natural gas.

Our lease operating expense of $28.6 million ($0.22 per Mcfe) for the third quarter of 2022 increased $2.0 million (8%) from lease operating expense of $26.6 million ($0.20 per Mcfe) for the third quarter of 2021.

Lease operating expense of $79.9 million ($0.22 per Mcfe) for the first nine months of 2022 increased $2.7 million (4%) from lease operating expense of $77.2 million ($0.21 per Mcfe) for the first nine months of 2021.

Gas service expenses were $181.8 million and $305.3 million for the three months and nine months ended September 30, 2022 and include the cost of unaffiliated third party natural gas purchased for resale and the operating expenses of the pipeline and natural gas treating plant acquired in April 2022.

Depreciation, depletion and amortization ("DD&A") increased $0.3 million to $129.1 million in the third quarter of 2022 from $128.7 million in the third quarter of 2021.

Our DD&A per equivalent Mcf produced was $1.00 per Mcfe for the quarter ended September 30, 2022 as compared to $0.98 for the quarter ended September 30, 2021.

DD&A decreased $4.3 million (1%) to $355.0 million in the first nine months of 2022 from $359.3 million in the first nine months of 2021.

Our DD&A per equivalent Mcf produced of $0.96 per Mcfe was the same for the first nine months of 2022 and 2021.

General and administrative expenses, which are reported net of overhead reimbursements, increased to $10.2 million for the third quarter of 2022 as compared to $8.1 million in the third quarter of 2021.

General and administrative expenses increased to $27.5 million for the first nine months of 2022 from $24.0 million in the first nine months of 2021.

The increases were primarily related to higher personnel costs.

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

During the quarter ended June 30, 2022, we had losses related to our derivative financial instruments of $72.8 million, as compared to net losses on derivative financial instruments of $224.0 million during the quarter ended June 30, 2021.

Realized net losses from our oil and natural gas price risk management program were $257.4 million for the quarter ended June 30, 2022 as compared to realized net losses of $18.8 million for the quarter ended June 30, 2021.

Net losses on derivative financial instruments were $510.3 million for the first six months of 2022 as compared to net losses of $245.7 million for the first six months of 2021.

Realized net losses from our oil and natural gas price risk management program were $374.5 million for the first six months of 2022 as compared to realized net losses of $27.3 million for the first six months of 2021.

Interest expense was $44.3 million and $56.9 million for the quarters ended June 30, 2022 and 2021, respectively, and $90.8 million and $120.7 million for the six months ended June 30, 2022 and 2021, respectively.

During the three months ended September 30, 2022, we had net losses related to our derivative financial instruments of $271.3 million, as compared to net losses on derivative financial instruments of $510.3 million during the quarter ended September 30, 2021.

Realized net losses from our oil and natural gas price risk management program were $304.5 million for the quarter ended September 30, 2022 as compared to realized net losses of $117.1 million for the quarter ended September 30, 2021.

Net losses on derivative financial instruments were $781.7 million for the first nine months of 2022 as compared to net losses of $756.0 million for the first nine months of 2021.

Realized net losses from our oil and natural gas price risk management program were $679.0 million for the first nine months of 2022 as compared to realized net losses of $144.4 million for the first nine months of 2021.

Interest expense was $41.4 million and $50.0 million for the quarters ended September 30, 2022 and 2021, respectively, and $132.2 million and $170.6 million for the nine months ended September 30, 2022 and 2021, respectively.

The decrease in interest expense is due primarily to the refinancing of our senior notes in 2021 and the early retirements of senior notes in May and June 2022.

Loss on extinguishment of debt was $46.8 million and $114.1 million for the quarter ended June 30, 2022 and 2021, respectively, and $46.8 million and $352.6 million for the six months ended June 30, 2022 and 2021, respectively.

In May and June 2022, we retired $244.4 million and $26.1 million, respectively, principal amount of our 7.5% senior notes due in 2025 and 6.75% senior notes due in 2029.

Loss on extinguishment of debt was $46.8 million and $352.6 million for the nine months ended September 30, 2022 and 2021, respectively.

In May 2022, we retired $244.4 million principal amount of our 7.5% senior notes due in 2025 in June 2022 we retired $26.1 million principal amount of our 6.75% senior notes due in 2029.

In March and June 2021, we redeemed all of our outstanding 9.75% senior notes due in 2026 and $375.0 million principal amount of our 7.5% senior notes due in 2025.

Income taxes for the quarter ended June 30, 2022 and 2021 were an expense of $108.4 million and a benefit of $68.2 million, respectively.

Income taxes for the six months ended June 30, 2022 and 2021 were an expense of $76.8 million and a benefit of $98.1 million, respectively.

Income tax expense for the three months and six months ended June 30, 2022 reflect an effective tax rate of 22.3% and 22.4%, respectively.

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

Income taxes for the quarter ended September 30, 2022 and 2021 were a provision of $102.8 million and $24.0 million, respectively.

Income taxes for the nine months ended September 30, 2022 and 2021 were a provision of $179.6 million and a benefit of $74.2 million, respectively.

Income tax expense for the three months and nine months ended September 30, 2022 reflect an effective tax rate of 22.4% and 22.5%, respectively.

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

The difference between the federal statutory tax rate of 21% and our effective rate is primarily attributable to revisions to the estimated future utilization of federal and state net operating loss carryforwards ("NOL") and the impact of state income taxes.

We reported net income available to common stockholders of $372.5 million or $1.36 per diluted share, for the quarter ended June 30, 2022 which included a $72.8 million net loss from derivative financial instruments and a $46.8 million loss on early retirement of debt.

Income from operations for the second quarter of 2022 was $649.1 million and we had interest expense of $44.3 million and $4.4 million in preferred stock dividends.

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.

In the first six months of 2022, we reported net income available to common stockholders of $256.8 million or $0.96 per diluted share, which included a $510.3 million net loss from derivative financial instruments and a $46.8 million loss on early retirement of debt.

Income from operations for the first six months of 2022 was $989.8 million and we had interest expense of $90.8 million and $8.7 million in preferred stock dividends.

We reported net loss available to common stockholders of $322.5 million or $1.39 per share for the six months ended June 30, 2021.

We reported net income available to common stockholders of $351.2 million or $1.28 per diluted share, for the quarter ended September 30, 2022 which included a $271.3 million net loss from derivative financial instruments.

Income from operations for the third quarter of 2022 was $771.1 million and we had interest expense of $41.4 million and $4.4 million in preferred stock dividends.

We reported net loss available to common stockholders of $292.7 million or $1.26 per share for the three months ended September 30, 2021.

In the first nine months of 2022, we reported net income available to common stockholders of $608.0 million or $2.24 per diluted share, which included a $781.7 million net loss from derivative financial instruments and a $46.8 million loss on early retirement of debt.

Income from operations for the first nine months of 2022 was $1.76 billion and we had interest expense of $132.2 million and $13.1 million in preferred stock dividends.

We reported net loss available to common stockholders of $615.2 million or $2.66 per share for the nine months ended September 30, 2021.

Cash Flows, Liquidity and Capital Resources

The following table summarizes sources and uses of cash and cash equivalents:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

2 unchanged sentences

Issuance of new senior notes, net of costs — 2,187,089

Borrowings on bank credit facility, net of repayments 115,000 —

Proceeds from asset sales 93 261

8 unchanged sentences

Cash flows from operating activities.

Net cash provided by our operating activities increased $300.4 million (78%) to $685.9 million in the first six months of 2022 from $385.6 million in the same period in 2021.

Net cash provided by our operating activities increased $585.9 million (95%) to $1.2 billion in the first nine months of 2022 from $618.6 million in the same period in 2021.

The increase is primarily due to higher realized natural gas prices in 2022.

5 unchanged sentences

Capital expenditures.

The increase in capital expenditures of $176.7 million is primarily due to our higher drilling and completion activity in 2022 and the acquisition of undeveloped Haynesville shale acreage and a high pressure natural gas pipeline and treating plant from an unaffiliated third party.

The increase in capital expenditures of $260.3 million is primarily due to our higher drilling and completion activity in 2022 and acquisitions of undeveloped Haynesville shale acreage and the acquisition of a natural gas pipeline and treating plant from an unaffiliated third party.

The following table summarizes our capital expenditure activity:

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Other development costs

Change to asset retirement obligations 816 855

52,500 26,795

Asset retirement obligations 1,223 1,660

Total exploration and development 767,998 508,422

5 unchanged sentences

Total cash capital expenditures $ 768,327 $ 508,051

We drilled 61 (30.5 net) wells and completed 61 (30.3 net) Haynesville and Bossier shale wells during the first six months of 2022.

We currently expect to spend an additional $440 million to $490 million in the remaining six months of 2022 to drill 42 (28.9 net) additional wells, to complete 33 (27.0 net) wells and for other development activity.

We drilled 91 (44.4 net) wells and completed 100 (46.2 net) Haynesville and Bossier shale wells during the first nine months of 2022.

We currently expect to spend an additional $225 million to $275 million in the remaining three months of 2022 to drill 21 operated (14.4 net) additional wells, to complete 11 (8.7 net) wells and for other development activity.

Liquidity and Capital Resources

As of June 30, 2022, we had $1.1 billion of liquidity, comprised of unused borrowing capacity under our bank credit facility and $32.3 million of cash and cash equivalents on hand.

As of September 30, 2022, we had $1.3 billion of liquidity, comprised of unused borrowing capacity under our bank credit facility and $38.6 million of cash and cash equivalents on hand.

Our short and long-term capital requirements consist primarily of funding our development and exploration activities, acquisitions, payments of contractual obligations and debt service.

4 unchanged sentences

We cannot provide any assurance that we will be able to obtain such capital, or if such capital is available, that we will be able to obtain it on acceptable terms.

We do not have a specific acquisition budget for 2022 because the timing and size of acquisitions are unpredictable.

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.

We do not have a specific acquisition budget for the remainder of 2022 because the timing and size of acquisitions are unpredictable.

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.

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

At June 30, 2022, we had $350.0 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 on April 15, 2022.

At September 30, 2022, we had $100.0 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.

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.

2 unchanged sentences

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, 2022.

At June 30, 2022, we had $897.4 million in U.S.

We were in compliance with the covenants as of September 30, 2022.

At September 30, 2022, we had $909.9 million in U.S.

federal NOL carryforwards and $1.5 billion in certain state NOL carryforwards.

11 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