×

Jones Energy, Inc. Announces 2016 Third Quarter Financial and Operating Results And Increases 2016 Guidance

AUSTIN, Texas, Nov. 02, 2016 (GLOBE NEWSWIRE) -- Jones Energy, Inc. (NYSE:JONE) (“Jones Energy” or “the Company”) today announced financial and operating results for the quarter ended September 30, 2016 as well as increased 2016 production and capital guidance.

Highlights

  • Average daily net production for the third quarter of 2016 of 18.6 MBoe/d, above the top end of guidance
  • Completed two acquisitions in the third quarter of 2016, including transformative $136.5 million STACK/SCOOP acquisition and bolt-on $26.3 million Anadarko acquisition
  • Raised $152.3 million in net proceeds from common stock and convertible preferred stock issuance
  • Expect to deploy first rig on new STACK/SCOOP asset in December 2016
  • Increasing full year 2016 production guidance to 18.6 – 19.4 MBoe/d
  • Lowering 2016 LOE guidance due to significant realized cost savings
  • Increasing full year 2016 capital guidance to $110 million primarily due to higher average working interest associated with Cleveland development program and expected STACK/SCOOP leasing
  • Borrowing base maintained at $425 million with fall redetermination
  • Net loss for the third quarter of 2016 of $22.4 million and EBITDAX of $46.8 million

Jonny Jones, the Company’s Founder, Chairman, and CEO, commented, “We had an active third quarter, which included completing two meaningful acquisitions and continuing to execute on our three rig Cleveland program. We are excited to get to work on our new STACK/SCOOP asset and expect to have our first rig in the field in December. Our recent opening of an Oklahoma City office gives us a local presence, which will help us realize the full potential of this exciting new asset.” Mr. Jones went on to say, “As a result of our solid operating momentum and compelling opportunity set, we are raising 2016 production and capital guidance while lowering LOE guidance. I am pleased with the significant progress we have made year-to-date on achieving our goals and I look forward to providing you with additional updates in the future.”

Financial Results

Total operating revenues for the three months ended September 30, 2016 were $33.4 million as compared to $47.2 million for the three months ended September 30, 2015. Total revenues including current period settlements of matured derivative contracts were $60.9 million for the three months ended September 30, 2016 as compared to $86.4 million for the three months ended September 30, 2015. The decrease was primarily due to lower production volumes.

Total operating expenses for the three months ended September 30, 2016 were $53.9 million as compared to $79.5 million for the three months ended September 30, 2015. Total operating expenses decreased compared to the same period last year primarily due to lower lease operating expense, production and ad valorem tax expense, exploration expense, depreciation, depletion, and amortization expense, and general and administrative expense.

For the three months ended September 30, 2016, the Company reported a net loss of $22.4 million and an adjusted net loss of $1.0 million, as compared to net income of $34.8 million and an adjusted net loss of $1.6 million for the three months ended September 30, 2015. The decrease was primarily due to lower production, which was partially offset by a decrease in operating expenses.

Operating Results

Cleveland

The Company resumed its drilling program in April 2016 and has had three rigs running since June 2016. During the third quarter, the Company spud 18 wells, completed 15 wells, and brought 13 wells online. Year-to-date through September 30, 2016, the Company has brought online a total of 19 wells. Average daily net production in the Cleveland was 13.0 MBoe/d in the third quarter of 2016.

Capital Expenditures

During the third quarter of 2016, the Company spent $29.3 million on capital expenditures excluding acquisitions, of which $28.4 million was drilling and completion capital and the remainder was related to maintenance capital and spending on non-operated wells, bringing total year-to-date 2016 capital expenditures excluding acquisitions to $53.1 million. The Company spent $163.6 million on acquisitions in the third quarter, bringing total capital expenditures including acquisitions for the third quarter of 2016 to $192.9 million and year-to-date capital expenditures including acquisitions to $216.7 million. The $163.6 million in capital expenditures on acquisitions includes the $136.5 million STACK/SCOOP acquisition and the $26.3 million Anadarko acquisition, which were both completed in the third quarter of 2016.

Updated Guidance

The Company is increasing its 2016 production and capital guidance and is also providing production guidance for the fourth quarter of 2016. Projected average production for the full year 2016 is expected to be between 18.6 MBoe/d and 19.4 MBoe/d. Higher 2016 production guidance is driven by continued base business outperformance as well as increased average working interest in our Cleveland development program. We are also increasing 2016 capital guidance to $110 million primarily due to the higher average Cleveland working interest, the spudding of our first well in the STACK/SCOOP trend, and expected opportunities to lease or acquire additional acreage in the STACK/SCOOP trend.

We plan to spud approximately 40 gross wells in 2016 and are beating our $2.03 million Cleveland AFE. We now forecast average working interest for our 2016 Cleveland development program to be between 85% and 90%, an increase from our previous guidance of approximately 80%.

We are lowering our 2016 lease operating expense guidance due to the realization of significant cost savings year-to-date. We are slightly increasing our 2016 cash G&A guidance primarily due to deal expenses and the opening of our new office in Oklahoma City.

Fourth quarter 2016 production is projected to be between 18.2 MBoe/d and 19.2 MBoe/d.

A table has been provided below with full year and fourth quarter 2016 guidance by category:

2016 Guidance
Previous
2016E
Current
2016E
4Q16E
Total Production (MMBoe) 6.6 - 7.1 6.9 - 7.1 1.6- 1.8
Average Daily Production (MBoe/d) 17.9 - 19.4 18.6 - 19.4 18.2-19.2
Crude Oil (MBbls/d) 4.5 - 4.9 4.4 - 4.8 4.4- 4.7
Natural Gas (MMcf/d) 48.0 - 51.9 50.0 - 52.0 50.0-52.0
NGLs (MBbls/d) 5.4 - 5.8 5.8 - 6.0 5.6- 5.8
Lease Operating Expense ($mm)$35.0 -$38.0 $34.0 -$36.0
Production Taxes (% of Unhedged Revenue)* 4.5%- 5.5% 4.5%- 5.5%
Ad Valorem Taxes ($mm)*$1.5 -$1.7 $1.5 -$1.7
Cash G&A Expense ($mm)$18.0 -$20.0 $19.0 -$21.0
Total Capital Expenditures Excluding Acquisitions ($mm)$90.0 $110.0

*Production and ad valorem taxes are included as one line item on the Company’s Consolidated Statements of Operations.

Liquidity and Hedging

The Company recently completed the fall redetermination of its borrowing base under its senior secured credit facility. The borrowing base was maintained at $425 million.

As of September 30, 2016, the Company had aggregate principal amount of senior unsecured notes outstanding of $559.1 million, outstanding borrowings under its revolving credit facility of $143.0 million, and approximately $24.0 million in cash.

In the third quarter of 2016, the Company issued 1.84 million shares of its 8.0% Series A Perpetual Convertible preferred stock for net proceeds of approximately $88.3 million. The Company also issued 24,150,000 shares of Class A common stock at $2.77 per share for net proceeds of approximately $64.0 million.

In the second quarter of 2016, the Company entered into an equity distribution agreement. As of September 30, 2016, the Company had issued approximately 0.5 million shares of Class A common stock under its equity distribution agreement for net proceeds of approximately $1.8 million.

The estimated mark-to-market value of the Company’s commodity price hedges was approximately $97 million incorporating strip pricing as of October 28, 2016. The following table summarizes the Company’s net commodity derivative contracts outstanding as of October 28, 2016 and also outlines approximately $47 million in crystallized hedge gains in 2018 and 2019:

Current Net Hedge Positions
Fiscal Year Ending December 31,
20161 2017 2018 2019
Oil, Natural Gas and NGL Swaps
Oil (MBbl) 463 1,603 1,014 -
Natural Gas (MMcf) 4,220 16,780 13,940 -
Ethane (MBbl) 12 - - -
Propane (MBbl) 202 759 - -
Iso Butane (MBbl) 24 103 - -
Butane (MBbl) 67 264 - -
Natural Gasoline (MBbl) 64 252 - -
Total NGLs (MBbl) 369 1,378 - -
Weighted Average Net Prices
Oil ($ / Bbl)$80.89 $66.85 $51.26 -
Natural Gas ($ / Mcf)$4.18 $3.92 $2.98 -
Ethane ($ / Gal)$0.21 - - -
Propane ($ / Gal)$0.52 $0.44 - -
Iso Butane ($ / Gal)$0.60 $0.63 - -
Butane ($ / Gal)$0.65 $0.60 - -
Natural Gasoline ($ / Gal)$1.32 $1.00 - -
Oil and Natural Gas Collars
Oil (MBbl) - - - 810
Floor ($ / Bbl) - - - $48.52
Ceiling ($ / Bbl) - - - $59.64
Natural Gas (MMcf) - - - 11,890
Floor ($ / Mcf) - - - $2.55
Ceiling ($ / Mcf) - - - $3.19
Crystallized Hedge Gains
Value of Gain ($mm) - - $ 38.7 $8.4

12016 hedges shown for the fourth quarter of the year.

Conference Call Details

Jones Energy will host a conference call for investors and analysts to discuss its results on Thursday, November 3, 2016 at 10:30 a.m. ET (9:30 a.m. CT). The conference call can be accessed via webcast through the Investor Relations section of Jones Energy’s website, www.jonesenergy.com, or by dialing (866) 393-4306 (for domestic U.S.) or (734) 385-2616 (International) and entering conference code 99639309. If you are not able to participate in the conference call, the webcast replay and a downloadable audio file will be available shortly following the call through the Investor Relations section of the Company’s website, www.jonesenergy.com.

About Jones Energy

Jones Energy, Inc. is an independent oil and natural gas company engaged in the development and acquisition of oil and natural gas properties in the Anadarko and Arkoma basins of Texas and Oklahoma. Additional information about Jones Energy may be found on the Company’s website at: www.jonesenergy.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including guidance regarding the number of rigs that will be running in 2016, the timing of the development of the new STACK/SCOOP acreage, the revised 2016 production guidance and capital budget, the anticipated acquisition of additional acreage in the STACK/SCOOP, expectations regarding average working interest, the cost to drill and complete wells and the resultant impact on the revised 2016 capital budget, and projections regarding total production, average daily production, percentage liquids, operating expenses, production and ad valorem taxes as a percentage of revenue, cash G&A expenses and capital expenditure levels for the full year and fourth quarter of 2016. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current economic and market conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, changes in oil and natural gas prices, weather and environmental conditions, the timing and amount of planned capital expenditures, availability and method of funding of acquisitions and divestitures, or the ability to integrate any acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company’s ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company’s business and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the SEC.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

Jones Energy, Inc.
Consolidated Statement of Operations (Unaudited)

Three months ended September 30, Nine months ended September 30,
(in thousands of dollars except per share data) 2016 2015 2016 2015
Operating revenues
Oil and gas sales $ 32,582 $ 46,499 $ 86,060 $ 156,955
Other revenues 771 653 2,295 2,210
Total operating revenues 33,353 47,152 88,355 159,165
Operating costs and expenses
Lease operating 7,865 8,872 24,027 32,930
Production and ad valorem taxes 1,733 2,513 5,061 9,292
Exploration 998 5,556 1,237 6,184
Depletion, depreciation and amortization 36,550 52,766 116,449 156,151
Accretion of ARO liability 323 210 913 610
General and administrative 6,448 9,628 22,078 27,572
Other operating 4,188
Total operating expenses 53,917 79,545 169,765 236,927
Operating income (loss) (20,564) (32,393) (81,410) (77,762)
Other income (expense)
Interest expense (12,792) (16,722) (40,397) (47,553)
Gain on debt extinguishment 99,530
Net gain (loss) on commodity derivatives 4,014 90,483 (18,769) 111,714
Other income (expense) 364 (7) 251 (1,631)
Other income (expense), net (8,414) 73,754 40,615 62,530
Income (loss) before income tax (28,978) 41,361 (40,795) (15,232)
Income tax provision (benefit) (6,549) 6,519 (8,234) (4,590)
Net income (loss) (22,429) 34,842 (32,561) (10,642)
Net income (loss) attributable to non-controlling interests (12,576) 21,604 (18,374) (7,625)
Net income (loss) attributable to controlling interests $ (9,853) $ 13,238 $ (14,187) $ (3,017)
Dividends and accretion on preferred stock (765) (765)
Net income (loss) attributable to common shareholders $ (10,618) $ 13,238 $ (14,952) $ (3,017)
Earnings (loss) per share:
Basic - Net income (loss) attributable to common shareholders $ (0.26) $ 0.44 $ (0.44) $ (0.12)
Diluted - Net income (loss) attributable to common shareholders $ (0.26) $ 0.44 $ (0.44) $ (0.12)
Weighted average shares outstanding:
Basic 41,375 30,432 34,300 25,591
Diluted 41,375 30,432 34,300 25,591

Jones Energy, Inc.
Consolidated Balance Sheet (Unaudited)

September 30, December 31,
(in thousands of dollars) 2016 2015
Assets
Current assets
Cash $ 24,041 $ 21,893
Accounts receivable, net
Oil and gas sales 20,720 19,292
Joint interest owners 4,880 11,314
Other 10,015 15,170
Commodity derivative assets 48,784 124,207
Other current assets 2,603 2,298
Total current assets 111,043 194,174
Oil and gas properties, net, at cost under the successful efforts method 1,742,165 1,635,766
Other property, plant and equipment, net 3,186 3,873
Commodity derivative assets 50,469 93,302
Other assets 6,406 8,039
Total assets $ 1,913,269 $ 1,935,154
Liabilities and Stockholders' Equity
Current liabilities
Trade accounts payable $ 27,328 $ 7,467
Oil and gas sales payable 26,445 32,408
Accrued liabilities 28,793 27,011
Commodity derivative liabilities 1,618 11
Asset retirement obligations 679 679
Total current liabilities 84,863 67,576
Long-term debt 688,432 837,654
Deferred revenue 9,589 11,417
Commodity derivative liabilities 526
Asset retirement obligations 27,452 20,301
Liability under tax receivable agreement 43,212 38,052
Other liabilities 656 330
Deferred tax liabilities 16,070 22,972
Total liabilities 870,800 998,302
Commitments and contingencies
Mezzanine equity
Series A preferred stock, $0.001 par value; 1,840,000 shares issued and outstanding at September 30, 2016 and no shares issued and outstanding at December 31, 2015 88,743
Stockholders' equity
Class A common stock, $0.001 par value; 56,991,824 shares issued and 56,969,222 shares outstanding at September 30, 2016 and 30,573,509 shares issued and 30,550,907 shares outstanding at December 31, 2015 57 31
Class B common stock, $0.001 par value; 29,872,426 shares issued and outstanding at September 30, 2016 and 31,273,130 shares issued and outstanding at December 31, 2015 30 31
Treasury stock, at cost: 22,602 shares at September 30, 2016 and December 31, 2015 (358) (358)
Additional paid-in-capital 447,400 363,723
Retained (deficit) / earnings 21,617 36,569
Stockholders' equity 468,746 399,996
Non-controlling interest 484,980 536,856
Total stockholders’ equity 953,726 936,852
Total liabilities and stockholders' equity $ 1,913,269 $ 1,935,154

Jones Energy, Inc.
Consolidated Statement of Cash Flow Data (Unaudited)

Nine months ended September 30,
(in thousands of dollars) 2016 2015
Cash flows from operating activities
Net income (loss) $ (32,561) $ (10,642)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depletion, depreciation, and amortization 116,449 156,151
Exploration (dry hole and lease abandonment) 945 5,250
Accretion of ARO liability 913 610
Amortization of debt issuance costs 3,083 3,379
Stock compensation expense 5,269 5,287
Deferred and other non-cash compensation expense 614 326
Amortization of deferred revenue (1,828) (1,521)
(Gain) loss on commodity derivatives 18,769 (111,714)
(Gain) loss on sales of assets (68) (10)
(Gain) on debt extinguishment (99,530)
Deferred income tax provision (11,824) (4,590)
Other - net 805 1,178
Changes in operating assets and liabilities
Accounts receivable 8,964 54,244
Other assets (466) 719
Accrued interest expense (1,050) 9,577
Accounts payable and accrued liabilities 6,425 (19,185)
Net cash provided by operations 14,909 89,059
Cash flows from investing activities
Additions to oil and gas properties (210,878) (280,528)
Proceeds from sales of assets 74 37
Acquisition of other property, plant and equipment (194) (1,034)
Current period settlements of matured derivative contracts 106,151 103,858
Net cash (used in) investing (104,847) (177,667)
Cash flows from financing activities
Proceeds from issuance of long-term debt 75,000 75,000
Repayment under long-term debt (42,000) (335,000)
Proceeds from senior notes 236,475
Purchase of senior notes (84,589)
Payment of debt issuance costs (1,514)
Net distributions paid to JEH unitholders (10,109)
Proceeds from sale of common stock 65,548 122,779
Proceeds from sale of preferred stock 88,236
Net cash provided by financing 92,086 97,740
Net increase (decrease) in cash 2,148 9,132
Cash
Beginning of period 21,893 13,566
End of period $ 24,041 $ 22,698
Supplemental disclosure of cash flow information
Cash paid for interest $ 38,380 $ 34,594
Change in accrued additions to oil and gas properties 9,031 (94,552)
Asset retirement obligations incurred, including changes in estimate 6,785 1,370

Jones Energy, Inc.
Selected Financial and Operating Statistics

The following table sets forth summary data regarding revenues, production volumes, average prices and average production costs associated with our sale of oil and natural gas for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 Change 2016 2015 Change
Revenues (in thousands of dollars):
Oil and gas sales$ 32,582 $ 46,499 $ (13,917) $ 86,060 $ 156,955 $ (70,895)
Other revenues 771 653 118 2,295 2,210 85
Current period settlements of matured derivative contracts 27,538 39,273 (11,735) 101,619 107,992 (6,373)
Total revenues including derivative impact $ 60,891 $ 86,425 $ (25,534) $ 189,974 $ 267,157 $ (77,183)
Net production volumes:
Oil (MBbls) 396 630 (234) 1,271 2,030 (759)
Natural gas (MMcf) 4,602 6,069 (1,467) 14,130 18,172 (4,042)
NGLs (MBbls) 549 682 (133) 1,633 1,946 (313)
Total (MBoe) 1,712 2,324 (612) 5,259 7,005 (1,746)
Average net (Boe/d) 18,609 25,261 (6,652) 19,193 25,659 (6,466)
Average sales price, unhedged:
Oil (per Bbl), unhedged$ 39.94 $ 42.74 $ (2.80) $ 35.59 $ 46.10 $ (10.51)
Natural gas (per Mcf), unhedged 2.08 1.95 0.13 1.50 2.03 (0.53)
NGLs (per Bbl), unhedged 13.09 11.37 1.72 11.99 13.59 (1.60)
Combined (per Boe), unhedged 19.03 20.01 (0.98) 16.36 22.41 (6.05)
Average sales price, hedged:
Oil (per Bbl), hedged$ 87.34 $ 78.64 $ 8.70 $ 86.26 $ 75.19 $ 11.07
Natural gas (per Mcf), hedged 3.46 3.24 0.22 3.51 3.37 0.14
NGLs (per Bbl), hedged 17.54 24.28 (6.74) 17.40 26.21 (8.81)
Combined (per Boe), hedged 35.12 36.91 (1.79) 35.69 37.82 (2.13)
Average costs (per Boe):
Lease operating$ 4.59 $ 3.82 $ 0.77 $ 4.57 $ 4.70 $ (0.13)
Production and ad valorem taxes 1.01 1.08 (0.07) 0.96 1.33 (0.37)
Depletion, depreciation and amortization 21.35 22.70 (1.35) 22.14 22.29 (0.15)
General and administrative 3.77 4.14 (0.37) 4.20 3.94 0.26

Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations

EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies.

We define EBITDAX as earnings before interest expense, income taxes, depreciation, depletion and amortization, exploration expense, gains and losses from derivatives less the current period settlements of matured derivative contracts, and the other items described below. EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP. Management believes EBITDAX is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. EBITDAX has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Certain items excluded from EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets. Our presentation of EBITDAX should not be construed as an inference that our results will be unaffected by unusual or non-recurring items and should not be viewed as a substitute for GAAP. Our computations of EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table sets forth a reconciliation of net income (loss) as determined in accordance with GAAP to EBITDAX for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands of dollars) 2016 2015 2016 2015
Reconciliation of EBITDAX to net income
Net income (loss) $ (22,429) $ 34,842 $ (32,561) $ (10,642)
Interest expense 12,068 15,924 38,186 45,187
Exploration expense 998 5,556 1,237 6,184
Income taxes (6,549) 6,519 (8,234) (4,590)
Amortization of deferred financing costs 724 798 2,211 2,366
Depreciation and depletion 36,550 52,766 116,449 156,151
Accretion of ARO liability 323 210 913 610
Reduction of TRA liability (260) (422)
Other non-cash charges 116 418 1,227 1,178
Stock compensation expense 2,185 2,039 5,269 5,287
Deferred and other non-cash compensation expense 213 108 614 326
Net (gain) loss on derivative contracts (4,014) (90,483) 18,769 (111,714)
Current period settlements of matured derivative contracts 27,538 39,273 101,619 107,992
Amortization of deferred revenue (587) (493) (1,828) (1,521)
(Gain) loss on sale of assets (69) (16) (68) (10)
(Gain) on debt extinguishment (99,530)
Stand-by rig costs 4,188
Financing expenses and other loan fees 25 22 298 2,323
EBITDAX $ 46,832 $ 67,483 $ 144,149 $ 203,315

Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations

Adjusted Net Income is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements. We define Adjusted Net Income as net income excluding the impact of certain non-cash items including gains or losses on commodity derivative instruments not yet settled, impairment of oil and gas properties, non-cash compensation expense, and the other items described below. We believe adjusted net income and adjusted earnings per share are useful to investors because they provide readers with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined. However, these measures are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP. The following table provides a reconciliation of net income (loss) as determined in accordance with GAAP to adjusted net income for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands except per share data) 2016 2015 2016 2015
Net income (loss) $ (22,429) $ 34,842 $ (32,561) $ (10,642)
Net (gain) loss on derivative contracts (4,014) (90,483) 18,769 (111,714)
Current period settlements of matured derivative contracts 27,538 39,273 101,619 107,992
Exploration 998 5,556 1,237 6,184
Non-cash stock compensation expense 2,185 2,039 5,269 5,287
Deferred and other non-cash compensation expense 213 108 614 326
(Gain) on debt extinguishment (99,530)
Stand-by rig costs 4,188
Financing expenses 2,250
Reduction of TRA liability (260) (422)
Tax impact of adjusting items (1) (5,374) 7,039 (5,705) (2,233)
Change in valuation allowance 106 498
Adjusted net income (loss) (1,037) (1,626) (10,212) 1,638
Adjusted net income (loss) attributable to non-controlling interests (1,074) (828) (6,640) 1,566
Adjusted net income (loss) attributable to controlling interests 37 (798) (3,572) 72
Dividends and accretion on preferred stock (765) (765)
Adjusted net income (loss) attributable to common shareholders $ (728) $ (798) $ (4,337) $ 72
Weighted average shares outstanding:
Basic 41,375 30,432 34,300 25,591
Diluted 41,375 30,432 34,300 25,591
Adjusted earnings per share (basic and diluted) $ (0.02) $ (0.03) $ (0.13) $ 0.00

(1) In arriving at adjusted net income, the tax impact of the adjustments to net income is determined by applying the appropriate tax rate to each adjustment and then allocating the tax impact between the controlling and non-controlling interests.

Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations

Adjusted Earnings per Share is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements. We define Adjusted Earnings per Share as earnings per share plus that portion of the components of adjusted net income allocated to the controlling interests divided by weighted average shares outstanding. We believe adjusted earnings per share is useful to investors because it provides readers with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined. However, these measures are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP. The following table provides a reconciliation of earnings per share to adjusted earnings per share for the period indicated:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands except per share data) 2016 2015 2016 2015
Earnings per share (basic and diluted) $ (0.26) $ 0.44 $ (0.44) $ (0.12)
Net (gain) loss on derivative contracts (0.06) (1.47) 0.27 (1.89)
Current period settlements of matured derivative contracts 0.38 0.64 1.53 1.79
Exploration 0.01 0.09 0.02 0.11
Non-cash stock compensation expense 0.03 0.03 0.08 0.09
Deferred and other non-cash compensation expense 0.01 0.01
(Gain) on debt extinguishment (1.43)
Stand-by rig costs 0.06
Financing expenses 0.03
Reduction of TRA liability (0.01)
Tax impact of adjusting items (1) (0.12) 0.24 (0.17) (0.08)
Change in valuation allowance 0.01
Adjusted earnings per share (basic and diluted) $ (0.02) $ (0.03) $ (0.13) $ 0.00
Weighted average shares outstanding:
Basic 41,375 30,432 34,300 25,591
Diluted 41,375 30,432 34,300 25,591
Effective tax rate on net income (loss) attributable to controlling interests 35.5% 39.7% 35.5% 39.7%

(1) In arriving at adjusted net income, the tax impact of the adjustments to net income is determined by applying the appropriate tax rate to each adjustment and then allocating the tax impact between the controlling and non-controlling interests.


Investor Contact: Robert Brooks, 512-328-2953 Executive Vice President & CFO ir@jonesenergy.com

Source:Jones Energy, Inc.