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Jones Energy, Inc. Provides 2016 Year-End Reserves, Operations and Financial Update, and 2017 Guidance

AUSTIN, Texas, Feb. 09, 2017 (GLOBE NEWSWIRE) -- Jones Energy, Inc. (NYSE:JONE) (“Jones Energy” or “the Company”) today provided its 2016 year-end reserves, an operations update and its initial 2017 capital budget and guidance.

Highlights

  • Initial Merge wells the BENNETT 24-11-6 1WH and HARDY 25-11-6 1WH both drilled successfully with completions underway. Commenced drilling third operated well, the BELYEU 33-9-5 1WH.
  • Added approximately 3,140 net acres to the Merge position to-date since the acquisition closing. The Company’s Merge position is currently approximately 21,000 net acres.
  • Initial 2017 capital budget of $275 million, of which $110 million is focused on Merge drilling and completions.
  • Production for both the fourth quarter and full year 2016 was 19.2 MBoe/d; oil production for the fourth quarter of 2016 was 4.5 MBbl/d.
  • Proved reserves at year-end 2016 were 105.2 MMBoe based on SEC pricing1; proved oil reserves were 23.6 MMBbl.
  • Proved reserves at year-end 2016 were 82.1 MMBoe in the Cleveland and 2.4 MMBoe in the Merge.
  • Liquidity of approximately $282 million as of December 31, 2016.

Jones Energy Founder, Chairman, and CEO, Jonny Jones stated, “2016 was an eventful year for our company, as we took decisive steps to improve our balance sheet and drive down costs allowing us to restart our Cleveland drilling program. In addition, we announced the acquisition of approximately 18,000 net acres in the Merge, a world-class operated position in the Eastern Anadarko Basin, which has transformed our asset base and transformed our opportunity set. The Merge program kicked-off in 2016 with our initial rig deployed to the field drilling a two-well pad. It is early days, but we feel confident that additional upside from our acquisition assumptions have already emerged with more potential landing points identified, offset operator density tests and early-time outperformance from nearby wells. Solid results from offset operators and elevated activity in the region further validates our beliefs that Merge is one of the premiere US onshore resource plays.”

Mr. Jones further commented that, “During 2016 we also met and exceeded our goals, raising production guidance by 7% and improving our cost structure across the operated program, realizing significant cost savings from both operational efficiencies and bid reductions. This resulted in a 50% decrease in average Cleveland well costs since year-end 2014 with 4Q16 average Cleveland D&C cost of $2 million and average spud-to-spud time of 17 days, with a record of 14 days achieved earlier during the year. Despite the challenging commodity environment where we began 2016 by suspending the drilling program, we went to work improving our cost structure, buying back our debt, and creating shareholder value through non-drillbit activities that readied ourselves for opportunity. In April, we restarted Cleveland drilling and scaled up to three rigs, achieving lower operating costs and increased efficiency gains. In August, we announced the Merge acquisition, launching an equity offering and a convertible preferred stock offering, both of which were oversubscribed.”

Mr. Jones went on to say, “Our year-end proved reserves reflect the strength of our Cleveland program and continued improvements to well economics. We believe that our multi-year hedge book and crystalized hedge offsets afford us significant dry powder as we continue to look for opportunities through organic leasing, pooling and M&A opportunities to increase our foothold in the Merge.”

2016 Year-End Proved Reserves

Jones Energy’s year-end 2016 proved reserves based on SEC pricing and definitions were 105.2 MMBoe, of which 59% were classified as proved developed reserves. Total proved oil reserves at year-end 2016 were 23.6 MMBbl compared to year-end 2015 proved oil reserves of 25.4 MMBbl.

The following tables set forth the Company’s total proved reserves and the changes in the Company’s total proved reserves. These estimates are based on reports prepared by Cawley, Gillespie & Associates, Inc., independent petroleum engineers. Year-end proved reserves were determined utilizing a WTI oil price of $42.75 per barrel and a Henry Hub spot market natural gas price of $2.46 per MMBtu as prescribed by the SEC.



Proved Reserves as of December 31, 2016
Oil
(MMBbl)
Gas
(Bcf)
NGLs
(MMBbl)
Total
(MMBoe)
% Liquids
Western Anadarko222.7209.828.886.460%
Eastern Anadarko30.75.30.82.463%
Arkoma0.156.84.614.233%
Other0.111.20.22.213%
Total Proved23.6283.134.4105.255%
Proved Developed11.5180.320.962.552%


Changes in Proved Reserves (MMBoe)
Proved reserves as of December 31, 2015101.7
Extensions and discoveries2.3
Production4(7.0)
Purchases of Minerals in Place13.3
Sales of Minerals in Place(0.0)
Revisions of previous estimates(5.0)
Proved reserves as of December 31, 2016105.2

Assuming strip pricing as of December 30, 2016, through 2021 and keeping pricing flat thereafter, instead of 2016 SEC pricing, while leaving all other parameters unchanged, the Company’s proved reserves would have been 116.4 MMBoe.

As of December 31, 2016, the Company had identified 2,716 gross drilling locations5. These include approximately 1,567 gross drilling locations in the Merge, of which the Company has approximately 353 gross operated locations with an average working interest of 54%. Our 353 gross operated locations are based on two benches in the Woodford, two benches in the Sycamore, and average well density of four wells per bench assumptions. Jones aims to continue growing the number of operated locations through organic leasing, pooling efforts and purchasing other acreage.

2017 Capital Budget and Operating Plan

The Company has established an initial capital budget of $275 million for 2017, comprised of $232 million drilling and completion capital expenditures and the remainder allocated to workovers, leasing and field maintenance projects. Of the total D&C budget, 47% is dedicated to ongoing drilling activity in the Merge. The Company intends to build operational momentum in the Merge throughout 2017 by increasing the rig count from the current one-rig pace, deploying a second rig in July and a third likely to follow by the end of 2017. Jones Energy expects to drill 26 gross (17 net) wells in the Merge during the year. In the Cleveland, the Company plans to maintain the three-rig program for the year and expects to drill 56 gross (45 net) wells in 2017.

We are reiterating our current 5,000’ lateral shallow-depth Merge AFE of $4.0 million and Cleveland AFE of $2.0 million. We are projecting average 2017 AFEs in the Merge to be $4.7 million, as a result of drilling across deeper portions of our acreage and projected service cost inflation. In the Cleveland, we also anticipate service cost inflation, which has been incorporated into 2017 guidance.

Leasing in the Merge continues to enhance the initial 18,000 net acre position. Since the closing of the Merge acquisition, Jones Energy has added approximately 3,140 net acres to-date at an average cost per acre below the average cost of the acquisition in August 2016. The Company’s total Merge position as of today, stands at approximately 21,000 net acres.

Operations Update

Production Update for the Fourth Quarter and Full Year 2016

The Company produced 1.8 MMBoe (approximately 19,200 Boe/d) in the fourth quarter of 2016 and an estimated 7.0 MMBoe (approximately 19,200 Boe/d) for the full year. Oil volumes comprised 23% of production for the fourth quarter and 24% for the full year. NGL volumes accounted for 32% of the fourth quarter production and full year volumes. During the fourth quarter, liquids accounted for 56% of total production.

Production in the fourth quarter of 2016 was within guidance, but was negatively affected by weather, completion delays, and mechanical issues. Jones Energy met production forecasts for the fourth quarter and full year of 2016 despite these delays and impacts. Approximately seven wells were carried into the first quarter of 2017 for completion. Beginning the week of January 8, 2017, the Company’s operations were impacted by severe ice storms that caused power outages across the Panhandle region, taking approximately 140 wells offline for nine days, representing approximately 25% of the Company’s total operated producing wells in the Western Anadarko. Jones Energy has since restored power and the wells are back online. We have accounted for the weather impact in our 1Q17 production guidance.

2016 Capital Expenditures

During the fourth quarter of 2016, the Company spent $52.1 million on capital expenditures, of which $31.2 million was related to drilling and completing wells, representing 60% of the total capital expenditures in the quarter. The remaining $20.9 million was primarily related to field maintenance and leasing.

For the full year 2016, the Company spent $105.8 million on non-acquisition capital expenditures, of which $72.2 million was related to drilling and completing wells, representing 73% of the total capital expenditures in the year. This is 10% below our revised 2016 capital expenditure guidance of $110 million.

2017 Production Guidance

Based upon the 2017 capital budget and operating plan, we are projecting 2017 average daily production of 20,700 to 23,000 Boe per day. A table has been provided below with full year and first quarter 2017 guidance by category.



2017 Guidance
2017E 1Q17E
Total Production (MMBoe)7.6 – 8.4 1.6 – 1.7
Average Daily Production (MBoe/d)20.7 – 23.0 17.0 – 18.0
Crude Oil (MBbl/d)5.7 – 6.3
Natural Gas (MMcf/d)51 – 57
NGLs (MBbl/d) 6.5 – 7.2
Lease Operating Expense ($mm)$45.0 – $50.0
Production Taxes (% of Unhedged Revenue) *4.5% – 5.5%
Ad Valorem Taxes ($mm) *$2.7 – $3.0
Cash G&A Expense ($mm)$23 – $25
Capital Expenditures ($mm)
Merge D&C$110
Cleveland D&C 122
Other 43
Total Capital Expenditures$275

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

Upcoming Conferences

Jones Energy plans to attend the upcoming Credit Suisse 22nd Annual Energy Summit in Vail, CO, February 13 – 16th. Presentation materials for the conference will be posted to the Company’s website at www.jonesenergy.com in the Investor Relations section.

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.

Investor Contacts:
Robert Brooks, 512-328-2953
Executive Vice President & CFO
Or
Page Portas, 512-493-4834
Investor Relations Associate

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 we intend to operate, the initial 2017 capital budget, expectations regarding the number of gross and net wells to be drilled, 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 2017. 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 of 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.


1 SEC prices for 2016 year-end proved reserves were $42.75 per barrel for oil and $2.46 per MMBtu for natural gas based on the average of such prices for 2016.
2 Western Anadarko includes the Cleveland, Granite Wash, Tonkawa and Marmaton.
3 Eastern Anadarko includes Merge and STACK.
4 Full year production figures are estimates pending final audit results by the Company’s outside auditor.
5 Company identified gross drilling locations based on Total Proved Undeveloped, Probable and Possible (“3P”) locations.

Source:Jones Energy, Inc.