Synergy Resources Reports Fiscal Fourth Quarter and Year End 2013 Results

Synergy Resources Reports Fiscal Fourth Quarter and Year End 2013 Results 
Full Year Revenues up 85% to Record $46.2 Million, Driving Operating
Income up 66% to Record $19.5 Million and Net Income of $0.16 per
Diluted Share; Company to Host Investor Conference Call Today,
November 5, at 11:00 a.m. ET 
PLATTEVILLE, CO  -- (Marketwired) -- 11/05/13 --  Synergy Resources
Corporation (NYSE MKT: SYRG), a U.S. oil and gas exploration and
production company focused on the Denver-Julesburg Basin, reported
its fiscal fourth quarter and year end results for the period ended
August 31, 2013. 
Fiscal Fourth Quarter and Year 2013 Financial Highlights as Compared
to the Same Year Ago Periods 


 
--  Revenue increased 117% to $14.7 million in the fourth quarter, and was
    up 85% to $46.2 million for the full year.
    
--  Operating Income increased 95% to $6.7 million in the quarter, and was
    up 66% to $19.5 million for the full year vs. $11.8 million in fiscal
    2012.
    
--  Net income was $1.0 million or $0.01 per diluted share in the quarter
    and $9.6 million or $0.16 per diluted share for the full year as
    compared to net income of $12.1 million or $0.25 per diluted share in
    fiscal 2012. Net income in fiscal 2013 includes deferred income tax
    expense of $6.8 million and an unrealized loss on commodity derivatives
    of $2.6 million.
     
--  Adjusted EBITDA was up 86% to a record $33.8 million in fiscal 2013,
    representing a 73% return on revenue for the full year (see further
    discussion about the presentation of adjusted EBITDA in "About Non-GAAP
    Financial Measures," below).
    
--  As of August 31, 2013, the company's cash, equivalents and short term
    investments totaled $79.5 million, as compared to $19.3 million at
    August 31, 2012. The current ratio at August 31, 2013 was 2.2 to 1.

 
Operational Highlights 


 
--  In the fourth quarter, net oil and natural gas production increased 95%
    to 228,042 barrels of oil equivalent (BOE), as compared to the same
    year-ago quarter, and averaged 2,479 BOE per day versus an average of
    1,270 BOE in the year ago quarter.
     
--  Brought 27 new operated vertical wells on-line during the year.
     
--  Participated in 21 non-operated horizontal wells during the year.
     
--  Increased estimated proved reserves to 7 million barrels of oil and 40.7
    billion cubic feet of gas, or combined total BOE of 13.8 million. The
    estimated present value of these reserves before tax and discounted at
    10% is $236 million. Total BOE increased 30%, and present value
    increased by 59%, as compared to the annual reserve report prepared on
    August 31, 2012.

 
Fiscal Fourth Quarter as Compared to Fiscal Third Quarter  
Results for the 2013 fiscal fourth quarter improved compared to the
third quarter. Revenues were $14.7 million, up from $12.3 million in
the third quarter. We attribute the increase in revenues to a
combination of higher production and higher commodity prices.
Realized oil prices averaged $92.32 per barrel in the fourth quarter
versus $83.98 in the third quarter, and the average realized price
per mcf for natural gas was $5.06 in Q4 compared to $4.76 in Q3.
Operating income for the fourth quarter was $6.7 million, up from
$4.9 million in the previous quarter. Net income totaled $1.0 million
or $0.01 per diluted share, down from $3.6 million or $0.06 per
diluted share in the third quarter. During the fourth quarter, there
was a significant change in the value of our commodity hedge
position, resulting in non-cash charges for an unrealized loss of
$3.0 million, compared to an unrealized gain of $0.5 million during
the third quarter. Adjusted EBITDA in the fourth quarter was $10.6
million, up 14% from $9.3 million in the previous quarter. 
The following table presents certain per unit metrics that compare
results of the corresponding quarterly and annual reporting periods: 


 
                     Three Months                                           
Per Unit Metric         Ended                     Years Ended               
----------------- -----------------          ---------------------          
                   August   August                                          
                     31,      31,            August 31, August 31,          
                                       %                              %     
Sales Volumes       2013     2012   Change      2013       2012     Change  
----------------- -------- -------- ------   ---------- ---------- -------  
Oil (Bbls)         125,045   72,361     73%     421,265    235,691      79% 
Gas (Mcf)          617,979  266,744    132%   2,107,603  1,109,057      90% 
Barrels of oil                                                              
 equivalent (BOE)  228,042  116,818     95%     772,532    420,534      84% 
BOE per day          2,479    1,270     95%       2,117      1,149      84% 
                                                                            
Revenues (in                                                                
 thousands)                                                                 
-----------------                                                           
Oil               $ 11,544 $  5,998     92%  $   36,206 $   20,644      75% 
Gas                  3,130      752    316%      10,017      4,325     132% 
                   -------  -------           ---------  ---------          
  Total           $ 14,674 $  6,750    117%  $   46,223 $   24,969      85% 
                  ======== ========          ========== ==========          
                                                                            
Average sales                                                               
 price                                                                      
-----------------                                                           
Oil ($/Bbls)      $  92.32 $  82.89     11%  $    85.95 $    87.59      (2%)
Gas ($/Mcf)       $   5.06 $   2.82     80%  $     4.75 $     3.90      22% 
Barrels of oil                                                              
 equivalent                                                                 
 ($/BOE)          $  64.35 $  57.78     11%  $    59.83 $    59.37       1% 
                                                                            
Average costs per                                                           
 BOE                                                                        
-----------------                                                           
Lease operating                                                             
 expense          $   4.67 $   2.91     60%  $     4.42 $     2.88      53% 
Production taxes  $   5.53 $   5.03     10%  $     5.48 $     5.79      (5%)
DD&A expense      $  17.63 $  12.07     46%  $    17.26 $    14.29      21% 
G&A expense       $   7.35 $   8.54    (14%) $     7.36 $     8.46     (13%)

 
Operational Results for the Fourth Fiscal Quarter and Year 2013 
In fiscal year 2013, the company reported that it had drilled and
brought into production 27 vertical wells. It also drilled 5 operated
horizontal wells, 3 Niobrara B bench and 2 Codell wells, on its
Renfroe pad that were in final stages of completion at the end of the
fiscal year and were brought into production during its fiscal first
quarter of 2014. Additionally the company participated as a
non-operating owner in 21 horizontal wells during the fiscal year, 11
of which were brought into production representing 2.36 net wells to
the company's working interest.  
The company completed the acquisition of assets from Orr Energy for
$42 million which added to its acreage position in the Wattenberg
Field and increased the number of potential horizontal drilling
locations.  
With the exception of two wells, all of the company's production is
in the Wattenberg Field of the D-J Basin. As of August 31, 2013, the
company operated 218 gross wells (202 net) and holds an ownership
interest in 75 gross wells (22 net) operated by other companies. 
In the fourth quarter of the fiscal year the company amended its
turn-key drilling contract with Ensign Drilling to drill an
additional 21 horizontal wells targeting the Niobrara and Codell
formations in the D-J Basin. At the end of the fiscal year the
company had drilled 2 of the contracted wells and subsequent to year
end has drilled 5 additional wells on the Leffler pad. After
finishing on the Leffler pad the rig will move to the Phelps pad to
begin drilling the next six wells. 
Management Commentary 
Ed Holloway, the CEO of Synergy Resources commented, "Fiscal 2013 was
another positive year of growth for Synergy achieving an 84% increase
in production despite not bringing into production any new operated
wells during the second half of the year while we switched from
vertically focused drilling operations to horizontal drilling. We
also demonstrated our ability to make acquisitions and increase our
lease hold foot print at very competitive prices. Synergy now has
over 22,000 net acres in the Greater Wattenberg Area. We continued
our disciplined low cost approach to our operations as evidenced
through our drilling and completion of the Renfroe horizontal wells
for less than $4 million per well, well below the costs of our peers.
We also strengthened our balance sheet with our equity offering in
the fourth quarter and are positioned to execute our fiscal 2014
cap-ex budget with cash on hand and estimated internal cash flow.
Additional liquidity is available under our credit facility to take
advantage of future opportunities." 
Fiscal 2014 Outlook 
Management anticipates updated CAPEX spending of $157.5 million on
the following programs with the vast majority of the drilling
expenditures weighted towards the horizontal drilling program in the
Wattenberg Field. The company anticipates funding this program with
cash on hand and cash flow from revenues. 


 
--  $96 million to drill 24 new horizontal wells as operator
     
--  $4 million to drill 6 new vertical wells as operator
     
--  $22.5 million to participate as a non-operator to drill approximately 5
    net horizontal wells to Synergy's interest
     
--  $5 million for land leasing
     
--  $30 million cash for acquisitions

 
Conference Call 
Synergy Resources will host a conference call today, Tuesday,
November 5, 2013 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time)
to discuss its fiscal fourth quarter and year end 2012 results.
President and CEO Ed Holloway, Vice President William Scaff, Jr. CFO
Monty Jennings, and VP of Operations Craig Rasmuson, will host the
presentation, followed by a question and answer period. 
Date: Tuesday, November 5, 2013
Time: 11:00 a.m. Eastern time (9:00 a.m. Mountain time)
Domestic Dial-In Number: 1-877-407 9122
International Dial-In Number: 1-201-493-6747 
The conference call will be webcast simultaneously which you can
access via this link: http//syrginfo.equisolvewebcast.com/q4-2013 and
via the investor section of the company's web site at
www.syrginfo.com.
Please call the conference telephone number 5 to 10 minutes prior to
the start time. An operator will register your name and organization.
If you have any difficulty connecting with the conference call,
please contact Jon Kruljac with Synergy Resources at 970-737-1073.
A replay of the call will be available after 3:00 p.m. ET on the same
day and until November 19, 2013.
Toll-free replay number: 1-877-660-6853
International replay number: 1-201-612-7415
Replay ID #: 411931 
About Synergy Resources Corporation 
Synergy Resources Corporation is a domestic oil and natural gas
exploration and production company. Synergy's core area of operations
is in the Denver-Julesburg Basin, which encompasses Colorado,
Wyoming, Kansas, and Nebraska. The Wattenberg field in the D-J Basin
ranks as one of the most productive fields in the U.S. The company's
corporate offices are located in Platteville, Colorado. More company
news and information about Synergy Resources is available at
www.SYRGinfo.com. 
Important Cautions Regarding Forward-Looking Statements  
This press release may contain forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995. The
use of words such as "believes", "expects", "anticipates", "intends",
"plans", "estimates", "should", "likely" or similar expressions,
indicates a forward-looking statement. These statements are subject
to risks and uncertainties and are based on the beliefs and
assumptions of management, and information currently available to
management. The actual results could differ materially from a
conclusion, forecast or projection in the forward-looking
information. Certain material factors or assumptions were applied in
drawing a conclusion or making a forecast or projection as reflected
in the forward-looking information. The identification in this press
release of factors that may affect the company's future performance
and the accuracy of forward-looking statements is meant to be
illustrative and by no means exhaustive. All forward-looking
statements should be evaluated with the understanding of their
inherent uncertainty. Factors that could cause the company's actual
results to differ materially from those expressed or implied by
forward-looking statements include, but are not limited to: the
success of the company's exploration and development efforts; the
price of oil and gas; worldwide economic situation; change in
interest rates or inflation; willingness and ability of third parties
to honor their contractual commitments; the company's ability to
raise additional capital, as it may be affected by current conditions
in the stock market and competition in the oil and gas industry for
risk capital; the company's capital costs, which may be affected by
delays or cost overruns; costs of production; environmental and other
regulations, as the same presently exist or may later be amended; the
company's ability to identify, finance and integrate any future
acquisitions; and the volatility of the company's stock price. 
About Reserve Estimates 
Reserve estimates mentioned in this release were prepared in
accordance with guidelines established by the Securities and Exchange
Commission for proved reserves. Probable and possible reserves are
excluded. Prices are based on a trailing twelve month average and are
held constant over the life of the properties. Similarly, costs are
held constant for the duration of the well. 
About Non-GAAP Financial Measures
The company uses "adjusted EBITDA," as a non-GAAP financial measure
to evaluate financial performance such as period-to-period
comparisons. This Non-GAAP measure is not defined under U.S. GAAP and
should be considered in addition to, not as a substitute for,
indicators of financial performance reported in accordance with U.S.
GAAP. The company may use non-GAAP measures that are not comparable
to measures with similar titles reported by other companies. Also, in
the future, the company may disclose different non-GAAP financial
measures in order to help investors more meaningfully evaluate and
compare the company's future results of operations to its previously
reported results. The company encourages investors to review its
financial statements and publicly-filed reports in their entirety and
not rely on any single financial measure. The section titled
"Reconciliation of Non-GAAP Financial Measures" includes a detailed
description of this measure as well as a reconciliation to its most
similar U.S. GAAP measure. 
Financial Statements 
Condensed financial statements are included below. Additional
financial information, including footnotes that are considered an
integral part of the financial statements, will be included in
Synergy's Edgar Filings at www.sec.gov on Form 10-K for the period
ended August 31, 2013. 


 
                        SYNERGY RESOURCES CORPORATION                       
                          CONDENSED BALANCE SHEETS                          
                          (unaudited, in thousands)                         
                                                                            
                                                   August 31     August 31  
                                                      2013          2012    
                                                 ------------- -------------
                                                                            
                                   ASSETS                                   
Cash and short term investments                  $      79,481 $      19,284
Other current assets                                    12,494         7,183
                                                 ------------- -------------
  Total current assets                                  91,975        26,467
Oil and gas properties and equipment                   197,965        92,702
Other assets                                             1,296         1,562
                                                  ------------  ------------
   Total assets                                  $     291,236 $     120,731
                                                 ============= =============
                                                                            
                    LIABILITIES AND SHAREHOLDERS' EQUITY                    
Current liabilities                              $      41,367 $      15,592
Revolving credit facility                               37,000         3,000
Deferred tax liability                                   6,538             -
Asset retirement obligations                             2,777         1,027
Other liabilities                                          334             -
                                                 ------------- -------------
  Total liabilities                                     88,016        19,619
                                                 ------------- -------------
Shareholders' equity:                                                       
  Common stock and paid-in capital                     216,454       123,928
  Accumulated deficit                                 (13,234)      (22,816)
                                                 ------------- -------------
   Total shareholders' equity                          203,220       101,112
                                                 ------------- -------------
    Total liabilities and shareholders' equity   $     291,236 $     120,731
                                                 ============= =============
 

 
                                                                           
                                                                           
                                                                           
                       SYNERGY RESOURCES CORPORATION                       
                    CONDENSED STATEMENTS OF OPERATIONS                     
        (unaudited, in thousands, except shares and per share data)        
                                                                           
                     Three Months Ended August                             
                                 31                Year Ended August 31,   
                    --------------------------- -------------------------- 
                        2013           2012         2013          2012     
                    ------------  ------------- ------------ ------------- 
                                                                           
Oil and gas revenues$     14,674  $       6,750 $     46,223  $     24,969 
                    ------------  ------------- ------------  ------------ 
Expenses:                                                                  
 Lease operating                                                           
  expenses                 1,065            164        3,417         1,212 
 Production taxes          1,262            764        4,237         2,436 
 Depreciation,                                                             
  depletion, and                                                           
  amortization             4,020          1,410       13,336         6,010 
 General and                                                               
  administrative           1,675            998        5,688         3,557 
                    ------------  ------------- ------------  ------------ 
   Total expenses          8,022          3,336       26,678        13,215 
                    ------------  ------------- ------------  ------------ 
                                                                           
Operating income           6,652          3,414       19,545        11,754 
                    ------------  ------------- ------------  ------------ 
                                                                           
Other income                                                               
 (expense):                                                                
 Commodity                                                                 
  derivative loss         (3,430)             -       (3,044)            - 
 Interest income                                                           
  (expense), net              24             10          (50)           38 
                    ------------  ------------- ------------  ------------ 
 Total other income                                                        
  (expense)               (3,406)            10       (3,094)           38 
                    ------------  ------------- ------------  ------------ 
                                                                           
Income before income                                                       
 taxes                     3,246          3,424       16,451        11,792 
                                                                           
Provision for income                                                       
 tax (or refund)           2,250          1,477        6,870          (332)
                                                                           
                    ------------ - ------------- -----------  ------------ 
Net income          $        996  $       1,947 $      9,581  $     12,124 
                    ============  ============= ============  ============ 
                                                                           
Net income per                                                             
 common share:                                                             
 Basic              $       0.02  $        0.04 $       0.17  $       0.26 
                    ============  ============= ============  ============ 
 Diluted            $       0.01  $        0.04 $       0.16  $       0.25 
                    ============  ============= ============  ============ 
Weighted average                                                           
 shares outstanding:                                                       
 Basic                66,283,325     51,409,340   57,089,362    46,587,558 
                    ============  ============= ============  ============ 
 Diluted              70,176,105     53,072,619   59,088,761    48,359,905 
                    ============  ============= ============  ============ 
 

 
                                                                            
                                                                            
                                                                            
                       SYNERGY RESOURCES CORPORATION                        
                     CONDENSED STATEMENTS OF CASH FLOWS                     
                For the years ended August 31, 2013 and 2012                
                         (unaudited, in thousands)                          
                                                          2013       2012   
                                                       ---------  --------- 
                                                                            
Cash flows from operating activities:                                       
  Net income                                           $   9,581  $  12,124 
                                                       ---------  --------- 
  Adjustments to reconcile net income to net cash                           
  provided by operating activities:                                         
    Depreciation, depletion, and amortization             13,336      6,010 
    Provision for deferred taxes (or refund)               6,870       (332)
    Stock-based compensation                               1,362        473 
    Unrealized decrease in value of commodity                               
     derivatives                                           2,649          - 
    Changes in operating assets and liabilities           (1,678)     2,977 
                                                       ---------  --------- 
  Total adjustments                                       22,539      9,128 
                                                       ---------  --------- 
  Net cash provided by operating activities               32,120     21,252 
                                                       ---------  --------- 
Cash flows from investing activities:                                       
  Acquisition of property and equipment                  (80,469)   (46,680)
  Purchase of short term investments                     (60,000)         - 
    Net cash used in investing activities               (140,469)   (46,680)
                                                       ---------  --------- 
Cash flows from financing activities:                                       
  Equity financing activities                             74,528     37,421 
  Debt financing activities                               34,000     (2,200)
    Net cash provided by financing activities            108,528     35,221 
                                                        --------   -------- 
Net increase in cash and equivalents                         179      9,793 
Cash and equivalents at beginning of period               19,284      9,491 
                                                       ---------  --------- 
Cash and equivalents at end of period                  $  19,463  $  19,284 
                                                       =========  ========= 

 
Reconciliation of Non-GAAP Financial Measures
The company defines adjusted EBITDA as net income adjusted to exclude
the impact of interest expense, interest income, income taxes,
depreciation, depletion and amortization, stock based compensation,
and the plus or minus change in fair value of derivative assets or
liabilities. The company believes adjusted EBITDA is relevant because
it is a measure of cash flow available to fund capital expenditures
and service debt and is a metric used by some industry analysts to
provide a comparison of its results with its peers. The following
table presents a reconciliation of the company's non-GAAP financial
measures to the nearest GAAP measure 


 
                                                                            
               RECONCILIATION OF NON-GAAP FINANCIAL MEASURES                
                         (unaudited, in thousands)                          
                                                                            
                                                   Three Months Ended       
                                            ------------------------------- 
                                               August     August    May 31, 
                                             31, 2013   31, 2012       2013 
                                            ---------  ---------  --------- 
Adjusted EBITDA:                                                            
  Net income                                $     996  $   1,947  $   3,615 
  Depreciation, depletion, and amortization     4,020      1,410      3,820 
  Provision for deferred income tax             2,250      1,477      1,701 
  Stock based compensation                        368        150        611 
  Change in fair value of commodity                                         
   derivative                                   3,017          -       (502)
  Interest and related items, net                 (24)       (10)        89 
                                            ---------  ---------  --------- 
    Adjusted EBITDA                         $  10,627  $   4,974  $   9,334 
                                            =========  =========  ========= 
                                                                            
                                                  Year Ended                
                                             -------------------            
                                               August     August            
                                             31, 2013   31, 2012            
                                             --------   --------            
Adjusted EBITDA:                                                            
  Net income                                $   9,581  $  12,124            
  Depreciation, depletion, and amortization    13,336      6,010            
  Provision for deferred income tax             6,870       (332)           
  Stock based compensation                      1,362        473            
  Change in fair value of commodity                                         
   derivative                                   2,649          -            
  Interest and related items, net                  50        (38)           
                                            ---------  ---------            
    Adjusted EBITDA                         $  33,848  $  18,237            
                                            =========  =========            

  
Company Contact:
Jon Kruljac
VP of Capital Markets and Investor Relations
Synergy Resources Corporation
20203 Highway 60
Platteville, Colorado 80651
970 737 1073 Platteville
303 840 8166 Denver
jkruljac@syrginfo.com