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Notes to the Consolidated Financial Statements (Unaudited)
1. Organization and Description of Business
Organization
Jones Energy, Inc. (the “Company”) was formed in March 2013 as a Delaware corporation to become a publicly-traded entity and the holding company of Jones Energy Holdings, LLC (“JEH”). As the sole managing member of JEH, the Company is responsible for all operational, management and administrative decisions relating to JEH’s business and consolidates the financial results of JEH and its subsidiaries.
JEH was formed as a Delaware limited liability company on December 16, 2009 through investments made by the Jones family, certain members of management and through private equity funds managed by Metalmark Capital, among others. JEH acts as a holding company of operating subsidiaries that own and operate assets that are used in the exploration, development, production and acquisition of oil and natural gas properties.
The Company’s certificate of incorporation authorizes two classes of common stock, Class A common stock and Class B common stock. The Class B common stock is held by the remaining owners of JEH prior to the initial public offering (“IPO”) of the Company (collectively, the “Class B shareholders”) and can be exchanged (together with a corresponding number of common units representing membership interests in JEH (“JEH Units”)) for shares of Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions. The Class B common stock has no economic rights but entitles its holders to one vote on all matters to be voted on by the Company’s stockholders generally. As of June 30, 2017, the Company held 66,649,057 JEH Units and all of the preferred units representing membership interests in JEH, and the remaining 29,823,927 JEH Units are held by the Class B shareholders. The Class B shareholders have no voting rights with respect to their economic interest in JEH, resulting in the Company reporting this ownership interest as a non-controlling interest.
The Company’s certificate of incorporation also authorizes the Board of Directors of the Company to establish one or more series of preferred stock. Unless required by law or by any stock exchange on which our common stock is listed, the authorized shares of preferred stock will be available for issuance without further action. Rights and privileges associated with shares of preferred stock are subject to authorization by the Board of Directors of the Company and may differ from those of any and all other series at any time outstanding.
On August 25, 2016, the Company issued 1,840,000 shares of its 8.0% Series A Perpetual Convertible Preferred Stock, par value $0.001 per share (the “Series A preferred stock”), pursuant to a registered public offering at $50 per share. See Note 11, “Stockholders’ and Mezzanine equity”.
Description of Business
The Company is engaged in the exploration, development, production and acquisition of oil and natural gas properties in the mid-continent United States, spanning areas of Texas and Oklahoma. The Company’s assets are located within the Eastern Anadarko basin, targeting the liquids rich Woodford shale and Meramec formations in the Merge area of the STACK/SCOOP, and the Western Anadarko basin, targeting the liquids rich Cleveland, Granite Wash, Tonkawa and Marmaton formations, and are owned by JEH and its operating subsidiaries. The Company is headquartered in Austin, Texas.
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|||
2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the Securities and Exchange Commission. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s financial position as of December 31, 2016 and the financial statements reported for June 30, 2017 and 2016 and each of the six-month periods then ended include the Company and all of its subsidiaries.
Certain prior period amounts have been reclassified to conform to the current presentation.
The accompanying unaudited condensed consolidated financial statements for the periods ending June 30, 2017 and 2016 have been prepared in accordance with GAAP for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been appropriately condensed or omitted in this Quarterly Report. The Company believes the disclosures made are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements contained in this report include all normal and recurring material adjustments that, in the opinion of management, are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented herein. It is recommended that these unaudited condensed consolidated financial statements should be read in conjunction with our most recent audited consolidated financial statements included in Jones Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016.
Use of Estimates
There have been no significant changes in our use of estimates since those reported in Jones Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016.
Production taxes
During the first quarter of 2017, the Company's application for High-Cost Gas Incentive refunds in Texas was approved for qualified wells on which taxes were initially paid between October 2012 and September 2016. The Company received a net production tax refund of $3.3 million, which was recorded as a reduction in Production and ad valorem taxes on the Company’s Consolidated Statement of Operations. No further refunds were received during the three months ended June 30, 2017.
Recent Accounting Pronouncements
Adopted in the current year-to-date period:
In March 2016, the FASB issued ASU 2016-09, “Compensation—Stock Compensation” (Topic 718). This amendment is intended to simplify the accounting for share-based payment awards to employees, specifically in regard to (1) the income tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments are effective for interim and annual reporting periods beginning after December 15, 2016. Therefore, the Company has adopted ASU 2016-09 effective as of January 1, 2017. Upon adoption of ASU 2016-09, the Company elected to change its accounting policy to account for forfeitures as they occur. The change was applied on a modified retrospective basis with a cumulative effect adjustment to retained earnings for forfeitures of $0.7 million as of January 1, 2017. As a result of the valuation allowance against the Company’s deferred tax assets, there was no net adjustment to retained earnings for the change in accounting for unrecognized windfall tax benefits.
In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting” as it relates to “Compensation—Stock Compensation” (Topic 718). This amendment clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The new guidance is expected to reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. Under ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if the award’s fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. The amendments are effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted and the Company chose to early adopt ASU 2017-09 beginning April 1, 2017. The change was applied prospectively to awards modified on or after the adoption date. Adoption did not have a material impact on the financial position, cash flows or results of operations.
To be adopted in a future period:
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which creates a new topic in the Accounting Standards Codification (“ASC”), topic 606, “Revenue from Contracts with Customers.” This ASU sets forth a five-step model for determining when and how revenue is recognized. Under the model, an entity will be required to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. Additional disclosures will be required to describe the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year. The amendments are now effective for interim and annual reporting periods beginning after December 15, 2017 and may be applied on either a full or modified retrospective basis. Early adoption is permitted. The Company is in the process of comparing our current revenue recognition policies to the new requirements for each of our revenue categories based upon review of our current contracts by product category and homogenous groupings. Our evaluation is not yet complete, and we have not concluded on the overall impacts of adopting the new requirements. The Company will continue to further evaluate the effect that the adoption of Update 2014-09 and Update 2015-14 will have on our financial statements and our anticipated method of adoption. We anticipate adoption of Update 2014-09 and Update 2015-14 effective as of January 1, 2018.
In February 2016, the FASB issued ASU 2016-02, “Leases” (Topic 842). This amendment requires, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The amendments are effective for interim and annual reporting periods beginning after December 15, 2018. The Company is currently evaluating the impacts of the amendments to our financial statements and accounting practices for leases. We anticipate adoption of ASU 2016-02 effective as of January 1, 2019.
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3. Acquisitions and Divestitures
During the six months ended June 30, 2017 and the year ended December 31, 2016, the Company entered into several purchase and sale agreements, as described below.
Merge Acquisition
On September 22, 2016, JEH acquired oil and gas properties located in the Merge area of the STACK/SCOOP (the “Merge”) play in Central Oklahoma (the “Merge Acquisition”) from SCOOP Energy Company, LLC for cash consideration of $134.4 million, net of the final working capital settlement of $2.4 million received in the first quarter of 2017. The oil and gas properties acquired in the Merge Acquisition, on a closed and funded basis, principally consist of 16,975 undeveloped net acres in Canadian, Grady and McClain Counties, Oklahoma. This transaction has been accounted for as an asset acquisition. The Company used proceeds from our equity offerings to fund a portion of the purchase. See Note 11, “Stockholders’ and Mezzanine equity”.
Anadarko Acquisition
On August 25, 2016, JEH acquired producing and undeveloped oil and gas assets in the Western Anadarko basin (the “Anadarko Acquisition”) for final consideration of $25.9 million. This transaction was accounted for as a business combination. The Company allocated $32.3 million to “Oil and gas properties,” with $3.0 million allocated to “Unproved” properties, $17.0 million allocated to “Proved” properties, and $12.3 million allocated to “Wells and equipment and related facilities”, based on the respective fair values of the assets acquired. Additionally, the Company allocated $6.4 million to our ARO liability associated with those proved properties. As of June 30, 2017, the measurement-period has closed. The Anadarko Acquisition did not result in a significant impact to revenues or net income and as such, pro forma financial information is not included. The Company funded the Anadarko Acquisition with cash on hand.
The assets acquired in the Anadarko Acquisition included interests in 174 wells, 59% of which were operated by the company, and approximately 25,000 net acres in Lipscomb and Ochiltree Counties in the Texas Panhandle. As of the closing date, the acquired acreage was producing approximately 900 barrels of oil equivalent per day.
Arkoma Divestiture
On August 1, 2017, JEH closed its previously announced agreement to sell its Arkoma Basin properties (the “Arkoma Assets”) for a purchase price of $65.0 million, subject to customary adjustments (the “Arkoma Divestiture”). JEH may also receive up to $2.5 million in contingent payments based on natural gas prices. No amounts have been recorded related to this contingent payment as of June 30, 2017. The Company received a deposit of $4.9 million associated with the pending sale which has been included in Other current liabilities on the Company’s Consolidated Balance Sheet as of June 30, 2017. See Note 15, “Subsequent Events - Arkoma Divestiture”.
Assets held for sale
As of June 30, 2017, the Arkoma Assets and related liabilities (the “Held for sale assets”) were classified as held for sale due to the pending Arkoma Divestiture. Upon the classification change occurring on June 30, 2017, the Company ceased recording depletion on the Held for sale assets. Based on the Company’s anticipated sales price, the Company has recognized an impairment charge of $161.9 million at June 30, 2017 which has been included in Impairment of oil and gas properties on the Company’s Consolidated Statement of Operations.
The following table presents balance sheet data related to the Held for sale assets:
|
|
|
June 30, |
|
|
|
(in thousands of dollars) |
|
2017 |
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
Oil and gas sales |
|
$ |
3,250 |
|
|
Joint interest owners |
|
|
102 |
|
|
Other |
|
|
14 |
|
|
|
|
|
|
|
|
Other current assets |
|
|
4 |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
27 |
|
|
Other |
|
|
68 |
|
|
Less: Accumulated depreciation and amortization |
|
|
(10) |
|
|
Other property, plant and equipment, net |
|
|
85 |
|
|
|
|
|
|
|
|
Total current assets held for sale |
|
|
3,455 |
|
|
|
|
|
|
|
|
Mineral interests in properties |
|
|
|
|
|
Unproved |
|
|
12,204 |
|
|
Proved |
|
|
216,570 |
|
|
Wells and equipment and related facilities |
|
|
179,925 |
|
|
Less: Accumulated depletion and impairment |
|
|
(344,499) |
|
|
Oil and gas properties, net |
|
|
64,200 |
|
|
|
|
|
|
|
|
Total assets held for sale, net |
|
$ |
67,655 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
379 |
|
|
Oil and gas sales payable, |
|
|
6,015 |
|
|
Accrued liabilities |
|
|
1,078 |
|
|
|
|
|
|
|
|
Total current liabilities related to assets held for sale |
|
|
7,472 |
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
1,143 |
|
|
|
|
|
|
|
|
Total liabilities related to assets held for sale |
|
$ |
8,615 |
|
|
|||
4. Properties, Plant and Equipment
Oil and Gas Properties
The Company accounts for its oil and natural gas exploration and production activities under the successful efforts method of accounting. Oil and gas properties consisted of the following at June 30, 2017 and December 31, 2016:
|
|
|
June 30, |
|
December 31, |
|
||
|
(in thousands of dollars) |
|
2017 |
|
2016 |
|
||
|
Mineral interests in properties |
|
|
|
|
|
|
|
|
Unproved |
|
$ |
180,018 |
|
$ |
213,153 |
|
|
Proved |
|
|
879,149 |
|
|
1,054,683 |
|
|
Wells and equipment and related facilities |
|
|
1,311,087 |
|
|
1,395,291 |
|
|
|
|
|
2,370,254 |
|
|
2,663,127 |
|
|
Less: Accumulated depletion and impairment |
|
|
(824,263) |
|
|
(919,539) |
|
|
Net oil and gas properties |
|
$ |
1,545,991 |
|
$ |
1,743,588 |
|
There were no exploratory wells drilled during the six months ended June 30, 2017 or 2016. As such, no associated costs were capitalized and no exploratory wells resulted in exploration expense during either period.
The Company capitalizes interest on expenditures for significant exploration and development projects that last more than six months while activities are in progress to bring the assets to their intended use. During the six months ended June 30, 2017, the Company capitalized $0.2 million associated with such in progress projects. The Company did not capitalize any interest during the six months ended June 30, 2016 as no projects lasted more than six months. Costs incurred to maintain wells and related equipment are charged to expense as incurred.
Depletion of oil and gas properties amounted to $45.1 million and $80.5 million for the three and six months ended June 30, 2017, respectively, and $37.8 million and $79.3 million for the three and six months ended June 30, 2016, respectively.
The Company continues to monitor its proved and unproved properties for impairment. No impairments of proved or unproved properties were recorded as a result of our standard impairment assessment during the six months ended June 30, 2017 or 2016. However, as noted in Note 3, “Acquisitions and Divestitures - Assets held for sale,” the Company has recognized an impairment charge of $161.9 million at June 30, 2017 based on the anticipated sales price of our Held for sale assets.
Other Property, Plant and Equipment
Other property, plant and equipment consisted of the following at June 30, 2017 and December 31, 2016:
|
|
|
June 30, |
|
December 31, |
|
||
|
(in thousands of dollars) |
|
2017 |
|
2016 |
|
||
|
Leasehold improvements |
|
$ |
1,186 |
|
$ |
1,213 |
|
|
Furniture, fixtures, computers and software |
|
|
4,378 |
|
|
4,170 |
|
|
Vehicles |
|
|
1,768 |
|
|
1,677 |
|
|
Aircraft |
|
|
910 |
|
|
910 |
|
|
Other |
|
|
215 |
|
|
284 |
|
|
|
|
|
8,457 |
|
|
8,254 |
|
|
Less: Accumulated depreciation and amortization |
|
|
(5,645) |
|
|
(5,258) |
|
|
Net other property, plant and equipment |
|
$ |
2,812 |
|
$ |
2,996 |
|
Depreciation and amortization of other property, plant and equipment amounted to $0.2 million and $0.5 million for the three and six months ended June 30, 2017, respectively, and $0.3 million and $0.6 million for the three and six months ended June 30, 2016, respectively.
|
|||
5. Long-Term Debt
Long-term debt consisted of the following at June 30, 2017 and December 31, 2016:
|
(in thousands of dollars) |
|
June 30, 2017 |
|
December 31, 2016 |
|
||
|
Revolver |
|
$ |
181,000 |
|
$ |
178,000 |
|
|
2022 Notes |
|
|
409,148 |
|
|
409,148 |
|
|
2023 Notes |
|
|
150,000 |
|
|
150,000 |
|
|
Total principal amount |
|
|
740,148 |
|
|
737,148 |
|
|
Less: unamortized discount |
|
|
(5,735) |
|
|
(6,240) |
|
|
Less: debt issuance costs, net |
|
|
(6,250) |
|
|
(6,899) |
|
|
Total carrying amount |
|
$ |
728,163 |
|
$ |
724,009 |
|
Senior Unsecured Notes
On April 1, 2014, JEH and Jones Energy Finance Corp., JEH’s wholly owned subsidiary formed for the sole purpose of co-issuing certain of JEH’s debt (collectively, the “Issuers”), sold $500.0 million in aggregate principal amount of the Issuers’ 6.75% senior notes due 2022 (the “2022 Notes”). The Company used the net proceeds from the issuance of the 2022 Notes to repay all outstanding borrowings under the Term Loan (as defined below) ($160.0 million), a portion of the outstanding borrowings under the Revolver (as defined below) ($308.0 million) and for working capital and general corporate purposes. The Company subsequently terminated the Term Loan in accordance with its terms. The 2022 Notes bear interest at a rate of 6.75% per year, payable semi-annually on April 1 and October 1 of each year beginning October 1, 2014. The 2022 Notes were registered in March 2015.
On February 23, 2015, the Issuers sold $250.0 million in aggregate principal amount of 9.25% senior notes due 2023 (the “2023 Notes”) in a private placement to affiliates of GSO Capital Partners LP and Magnetar Capital LLC. The 2023 Notes were issued at a discounted price equal to 94.59% of the principal amount. The Company used the $236.5 million net proceeds from the issuance of the 2023 Notes to repay outstanding borrowings under the Revolver and for working capital and general corporate purposes. The 2023 Notes bear interest at a rate of 9.25% per year, payable semi-annually on March 15 and September 15 of each year beginning September 15, 2015. The 2023 Notes were registered in February 2016.
During 2016, the Company purchased an aggregate principal amount of $190.9 million of its senior unsecured notes through several open market and privately negotiated purchases. The Company purchased $90.9 million principal amount of its 2022 Notes for $38.1 million, and $100.0 million principal amount of its 2023 Notes for $46.5 million, in each case excluding accrued interest and including any associated fees. The Company used cash on hand and borrowings from its Revolver to fund the note purchases. In conjunction with the extinguishment of this debt, JEH recognized cancellation of debt income of $99.5 million for the twelve months ended December 31, 2016, on a pre-tax basis. This income is recorded in Gain on debt extinguishment on the Company’s Consolidated Statement of Operations. Of the Company’s total repurchases, $20.3 million principal amount of its 2022 Notes were not cancelled and are available for future reissuance, subject to applicable securities laws.
The 2022 Notes and 2023 Notes are guaranteed on a senior unsecured basis by the Company and by all of its significant subsidiaries. The 2022 Notes and 2023 Notes will be senior in right of payment to any future subordinated indebtedness of the Issuers.
The Company may redeem the 2022 Notes at any time on or after April 1, 2017 and the 2023 Notes at any time on or after March 15, 2018 at a declining redemption price set forth in the respective indentures, plus accrued and unpaid interest.
The indentures governing the 2022 Notes and 2023 Notes are substantially identical and contain covenants that, among other things, limit the ability of the Company to incur additional indebtedness or issue certain preferred stock, pay dividends on capital stock, transfer or sell assets, make investments, create certain liens, enter into agreements that restrict dividends or other payments from the Company’s restricted subsidiaries to the Company, consolidate, merge or transfer all of the Company’s assets, engage in transactions with affiliates or create unrestricted subsidiaries. If at any time when the 2022 Notes or 2023 Notes are rated investment grade and no default or event of default (as defined in the indenture) has occurred and is continuing, many of the foregoing covenants pertaining to the 2022 Notes or 2023 Notes, as applicable, will be suspended. If the ratings on the 2022 Notes or 2023 Notes, as applicable, were to decline subsequently to below investment grade, the suspended covenants would be reinstated.
As of June 30, 2017, the Company was in compliance with the indentures governing the 2022 Notes and 2023 Notes.
Other Long-Term Debt
The Company entered into two credit agreements dated December 31, 2009, with Wells Fargo Bank N.A, the Senior Secured Revolving Credit Facility (the “Revolver”) and the Second Lien Term Loan (the “Term Loan”). On April 1, 2014, the Term Loan was repaid in full and terminated in connection with the issuance of the 2022 Notes. On November 6, 2014, the Company amended the Revolver to, among other things, extend the maturity date of the Revolver to November 6, 2019. The Company’s oil and gas properties are pledged as collateral to secure its obligations under the Revolver.
On August 1, 2016, the Company entered into an amendment to the Revolver to, among other things (i) require that the Company's deposit accounts and securities accounts (subject to certain exclusions) become subject to control agreements, (ii) restrict the Company from borrowing or receiving Letters of Credit under the Revolver if the Company has, or, after giving effect to such borrowing or issuance of Letter of Credit, will have, a Consolidated Cash Balance (as defined in the Revolver) in excess of $30.0 million (in each case giving effect to the anticipated use of proceeds thereof) and (iii) set the borrowing base under the Revolver at $425.0 million. The borrowing base was reaffirmed at this level during the most recent semi-annual borrowing base re-determination effective May 15, 2017. On August 1, 2017, upon closing of the Arkoma Divestiture, the Company’s borrowing base was reduced to $375.0 million. See Note 15, “Subsequent Events”.
The terms of the Revolver require the Company to make periodic payments of interest on the loans outstanding thereunder, with all outstanding principal and interest under the Revolver due on the maturity date. The Revolver is subject to a borrowing base, which limits the amount of borrowings which may be drawn thereunder. The borrowing base will be re-determined by the lenders at least semi-annually on or about April 1 and October 1 of each year, with such re-determination based primarily on reserve reports using lender commodity price expectations at such time. Any reduction in the borrowing base will reduce our liquidity, and, if the reduction results in the outstanding amount under our revolving credit facility exceeding the borrowing base, we will be required to repay the deficiency within a short period of time.
Interest on the Revolver is calculated, at the Company’s option, at either (a) the London Interbank Offered (“LIBO”) rate for the applicable interest period plus a margin of 1.50% to 2.50% based on the level of borrowing base utilization at such time or (b) the greatest of the federal funds rate plus 0.50%, the one month adjusted LIBO rate plus 1.00%, or the prime rate announced by Wells Fargo Bank, N.A. in effect on such day, in each case plus a margin of 0.50% to 1.50% based on the level of borrowing base utilization at such time. For the three and six months ended June 30, 2017, the average interest rates under the Revolver were 2.84% and 2.72%, respectively, on average outstanding balances of $194.6 million and $194.9 million, respectively. For the three and six months ended June 30, 2016, the average interest rates under the Revolver were 2.25% and 2.43%, respectively, on average outstanding balances of $185.0 million and $164.0 million, respectively.
Total interest and commitment fees under the Revolver were $1.6 million and $3.1 million for the three and six months ended June 30, 2017, respectively, and $1.3 million and $2.6 million for the three and six months ended June 30, 2016, respectively.
Jones Energy, Inc. and its consolidated subsidiaries are subject to certain covenants under the Revolver, including the requirement to maintain the following financial ratios:
|
· |
a total leverage ratio, consisting of consolidated debt to EBITDAX, of not greater than 4.0 to 1.00x as of the last day of any fiscal quarter; and |
|
· |
a current ratio, consisting of consolidated current assets, including the unused amounts of the total commitments, to consolidated current liabilities, of not less than 1.00 to 1.00x as of the last day of any fiscal quarter. |
As of June 30, 2017, our total leverage ratio was 3.84x and our current ratio was 2.70x, as calculated based on the requirements in our covenants. We were in compliance with all terms of our Revolver at June 30, 2017, and we expect to maintain compliance throughout the next twelve-month period. However, factors including those outside of our control, such as commodity price declines, may prevent us from maintaining compliance with these covenants, at future measurement dates in 2017 and beyond. In the event it were to become necessary, we believe we have the ability to take actions that would prevent us from failing to comply with our covenants, such as hedge restructuring or seeking a waiver of such covenants. If an event of default exists under the Revolver, the lenders would be able to accelerate the obligations outstanding under the Revolver and exercise other rights and remedies. Our Revolver contains customary events of default, including the occurrence of a change of control, as defined in the Revolver.
|
|||
6. Derivative Instruments and Hedging Activities
The Company uses derivative instruments to mitigate volatility in commodity prices. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues from favorable price changes. Depending on changes in oil and gas futures markets and management’s view of underlying supply and demand trends, we may increase or decrease our hedging positions.
The following tables summarize our hedging positions as of June 30, 2017:
Hedging Positions
|
|
|
June 30, 2017 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
Final |
|
|
|
|
|
|
|
Low |
|
High |
|
Average |
|
Expiration |
|
|||
|
Oil swaps |
|
Exercise price |
|
$ |
44.60 |
|
$ |
85.60 |
|
$ |
56.75 |
|
December 2020 |
|
|
|
|
Offset exercise price |
|
$ |
42.00 |
|
$ |
47.65 |
|
$ |
46.43 |
|
|
|
|
|
|
Net barrels per month |
|
|
20,000 |
|
|
181,000 |
|
|
76,762 |
|
|
|
|
Natural gas swaps |
|
Exercise price |
|
$ |
2.76 |
|
$ |
4.57 |
|
$ |
3.18 |
|
December 2020 |
|
|
|
|
Offset exercise price |
|
$ |
2.80 |
|
$ |
2.92 |
|
$ |
2.81 |
|
|
|
|
|
|
Net mmbtu per month |
|
|
300,000 |
|
|
1,890,000 |
|
|
1,093,095 |
|
|
|
|
Natural gas liquids swaps |
|
Exercise price |
|
$ |
18.06 |
|
$ |
72.52 |
|
$ |
28.61 |
|
December 2018 |
|
|
|
|
Barrels per month |
|
|
130,000 |
|
|
145,000 |
|
|
140,000 |
|
|
|
|
Oil collars |
|
Puts (floors) |
|
$ |
45.00 |
|
$ |
50.00 |
|
$ |
48.52 |
|
September 2019 |
|
|
|
|
Calls (ceilings) |
|
$ |
56.60 |
|
$ |
61.00 |
|
$ |
59.64 |
|
|
|
|
|
|
Net barrels per month |
|
|
65,000 |
|
|
73,000 |
|
|
67,500 |
|
|
|
|
Natural gas collars |
|
Puts (floors) |
|
$ |
2.55 |
|
$ |
2.55 |
|
$ |
2.55 |
|
December 2019 |
|
|
|
|
Calls (ceilings) |
|
$ |
3.08 |
|
$ |
3.41 |
|
$ |
3.19 |
|
|
|
|
|
|
Net barrels per month |
|
|
950,000 |
|
|
1,050,000 |
|
|
990,833 |
|
|
|
The Company recognized net gains on derivative instruments of $21.5 million and $43.8 million for the three and six months ended June 30, 2017, respectively. The Company recognized net losses on derivative instruments of $40.0 million and $22.8 million for the three and six months ended June 30, 2016, respectively.
The Company routinely enters into oil and natural gas swap contracts as seller, thus resulting in a fixed price. During 2016 and 2017, the Company realized certain mark-to-market gains associated with oil and natural gas hedges the Company had in place for years 2018 and 2019. The gains were effectively realized by purchasing, as opposed to selling, oil and natural gas swap contracts for the equal volume that was associated with the initial hedge transaction. Therefore, as prices fluctuate, the loss (or gain) on any single contract in 2018 and 2019 will be offset by an equal gain (or loss). This essentially leaves the underlying production open to fluctuations in market prices. Based on the original contract terms of these purchased swaps, the gains would be recognized as the hedge contracts mature in 2018 and 2019. See further discussion below. Information related to these purchased oil and natural gas swap contracts is presented in the table above as the “offset exercise price”, and the volumes in the table above are presented “net” of such purchased oil and natural gas swap contracts.
During the three and six months ended June 30, 2017, the Company unwound a portion of its realized 2018 and 2019 hedges resulting in approximately $8.1 million and $28.0 million, respectively, of recognized gains which have been included in Net gain (loss) on commodity derivatives on the Company’s Consolidated Statement of Operations.
Offsetting Assets and Liabilities
As of June 30, 2017, the counterparties to our commodity derivative contracts consisted of six financial institutions. All of our counterparties or their affiliates are also lenders under the Revolver. We are not generally required to post additional collateral under our derivative agreements.
Our derivative agreements contain set-off provisions that state that in the event of default or early termination, any obligation owed by the defaulting party may be offset against any obligation owed to the defaulting party.
The following table presents information about our commodity derivative contracts that are netted on our Consolidated Balance Sheet as of June 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
Net Amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
of Assets / |
|
Gross Amounts |
|
|
|
|
|||
|
|
|
Gross Amounts |
|
Amounts |
|
Liabilities |
|
Not |
|
|
|
|
||||
|
|
|
of Recognized |
|
Offset in the |
|
Presented in |
|
Offset in the |
|
|
|
|
||||
|
|
|
Assets / |
|
Balance |
|
the Balance |
|
Balance |
|
|
|
|
||||
|
(in thousands of dollars) |
|
Liabilities |
|
Sheet |
|
Sheet |
|
Sheet |
|
Net Amount |
|
|||||
|
June 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
58,023 |
|
$ |
(12,286) |
|
$ |
45,737 |
|
$ |
— |
|
$ |
45,737 |
|
|
Liabilities |
|
|
(15,445) |
|
|
12,286 |
|
|
(3,159) |
|
|
— |
|
|
(3,159) |
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
79,649 |
|
$ |
(20,805) |
|
$ |
58,844 |
|
$ |
— |
|
$ |
58,844 |
|
|
Liabilities |
|
|
(36,664) |
|
|
20,805 |
|
|
(15,859) |
|
|
— |
|
|
(15,859) |
|
|
|||
7. Fair Value Measurement
Fair Value of Financial Instruments
The Company determines fair value amounts using available market information and appropriate valuation methodologies. Fair value is the price that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amounts.
The Company enters into a variety of derivative financial instruments, which may include over-the-counter instruments, such as natural gas, crude oil, and natural gas liquid contracts. The Company utilizes valuation techniques that maximize the use of observable inputs, where available. If listed market prices or quotes are not published, fair value is determined based upon a market quote, adjusted by other market-based or independently sourced market data, such as trading volume, historical commodity volatility, and counterparty-specific considerations. These adjustments may include amounts to reflect counterparty credit quality, the time value of money, and the liquidity of the market.
Counterparty credit valuation adjustments are necessary when the market price of an instrument is not indicative of the fair value as a result of the credit quality of the counterparty. Generally, market quotes assume that all counterparties have low default rates and equal credit quality. Therefore, an adjustment may be necessary to reflect the quality of a specific counterparty to determine the fair value of the instrument. The Company currently has all derivative positions placed and held by members of its lending group, which have high credit quality.
Liquidity valuation adjustments are necessary when the Company is not able to observe a recent market price for financial instruments that trade in less active markets. Exchange traded contracts are valued at market value without making any additional valuation adjustments; therefore, no liquidity reserve is applied.
Valuation Hierarchy
Fair value measurements are grouped into a three-level valuation hierarchy. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. A financial instrument’s categorization within the hierarchy is based upon the input that requires the highest degree of judgment in the determination of the instrument’s fair value. The three levels are defined as follows:
Level 1 Pricing inputs are based on published prices in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, as of the reporting date. Contracts that are not traded on a recognized exchange or are tied to pricing transactions for which forward curve pricing is readily available are classified as Level 2 instruments. These include natural gas, crude oil and some natural gas liquids price swaps and natural gas basis swaps.
Level 3 Pricing inputs include significant inputs that are generally unobservable from objective sources. The Company classifies natural gas liquid swaps and basis swaps for which future pricing is not readily available as Level 3. The Company obtains estimates from independent third parties for its open positions and subjects those to the credit adjustment criteria described above.
The financial instruments carried at fair value as of June 30, 2017 and December 31, 2016, by consolidated balance sheet caption and by valuation hierarchy, as described above are as follows:
|
(in thousands of dollars) |
|
June 30, 2017 |
|
||||||||||
|
|
|
Fair Value Measurements Using |
|
||||||||||
|
Commodity Price Hedges |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Current assets |
|
$ |
— |
|
$ |
39,823 |
|
$ |
— |
|
$ |
39,823 |
|
|
Long-term assets |
|
|
— |
|
|
3,567 |
|
|
2,347 |
|
|
5,914 |
|
|
Current liabilities |
|
|
— |
|
|
2,702 |
|
|
334 |
|
|
3,036 |
|
|
Long-term liabilities (1) |
|
|
— |
|
|
(137) |
|
|
260 |
|
|
123 |
|
|
(in thousands of dollars) |
|
December 31, 2016 |
|
||||||||||
|
|
|
Fair Value Measurements Using |
|
||||||||||
|
Commodity Price Hedges |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Current assets |
|
$ |
— |
|
$ |
24,100 |
|
$ |
— |
|
$ |
24,100 |
|
|
Long-term assets (2) |
|
|
— |
|
|
36,384 |
|
|
(1,640) |
|
|
34,744 |
|
|
Current liabilities |
|
|
— |
|
|
13,636 |
|
|
1,014 |
|
|
14,650 |
|
|
Long-term liabilities |
|
|
— |
|
|
892 |
|
|
317 |
|
|
1,209 |
|
|
(1) |
Level 2 long-term liabilities are negative as a result of the netting of our commodity derivatives reflected on our Consolidated Balance Sheet as of June 30, 2017. Our agreements include set-off provisions, as noted in Note 6, “Derivative Instruments and Hedging Activities - Offsetting Assets and Liabilities”. |
|
(2) |
Level 3 long-term assets are negative as a result of the netting of our commodity derivatives reflected on our Consolidated Balance Sheet as of December 31, 2016. Our agreements include set-off provisions, as noted in Note 6, “Derivative Instruments and Hedging Activities - Offsetting Assets and Liabilities”. |
The following table represents quantitative information about Level 3 inputs used in the fair value measurement of the Company’s commodity derivative contracts as of June 30, 2017:
|
|
|
Quantitative Information About Level 3 Fair Value Measurements |
|
|||||||
|
|
|
Fair Value |
|
|
|
Unobservable |
|
|
|
|
|
Commodity Price Hedges |
|
(000’s) |
|
Valuation Technique |
|
Input |
|
Range |
|
|
|
Natural gas liquid swaps |
|
$ |
(252) |
|
Use a discounted cash flow approach using inputs including forward price statements from counterparties |
|
Natural gas liquid futures |
|
$22.89 - $23.94 per barrel |
|
|
Crude oil collars |
|
$ |
2,766 |
|
Use a discounted option model approach using inputs including interpolated volatilities for certain settlement months where market volatility quotes were unavailable for the option strike price |
|
Market volatility quotes at the option strike for certain settlement months in 2019 |
|
$45.00 - $61.00 per barrel |
|
|
Natural gas collars |
|
$ |
(761) |
|
Use a discounted option model approach using inputs including interpolated volatilities for certain settlement months where market volatility quotes were unavailable for the option strike price |
|
Market volatility quotes at the option strike for certain settlement months in 2019 |
|
$2.55 - $3.41 per barrel |
|
Significant increases/decreases in natural gas liquid prices in isolation would result in a significantly lower/higher fair value measurement. The following table presents the changes in the Level 3 financial instruments for the six months ended June 30, 2017. Changes in fair value of Level 3 instruments represent changes in gains and losses for the periods that are reported in other income (expense). New contracts entered into during the year are generally entered into at no cost with changes in fair value from the date of agreement representing the entire fair value of the instrument. Transfers between levels are evaluated at the end of the reporting period.
The following table summarizes the Company’s commodity derivative contract activity involving Level 3 instruments during the six months ended June 30, 2017:
|
(in thousands of dollars) |
|
|
|
|
|
Balance at December 31, 2016, net |
|
$ |
(2,971) |
|
|
Purchases |
|
|
131 |
|
|
Settlements |
|
|
716 |
|
|
Transfers to Level 2 |
|
|
— |
|
|
Transfers to Level 3 |
|
|
— |
|
|
Changes in fair value |
|
|
3,877 |
|
|
Balance at June 30, 2017, net |
|
$ |
1,753 |
|
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
The following table provides the fair value of financial instruments that are not recorded at fair value in the consolidated financial statements:
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
||||||||
|
|
|
Principal |
|
|
|
|
Principal |
|
|
|
|
||
|
(in thousands of dollars) |
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
|
||||
|
Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolver |
|
$ |
181,000 |
|
$ |
181,000 |
|
$ |
178,000 |
|
$ |
178,000 |
|
|
2022 Notes |
|
|
409,148 |
|
|
289,206 |
|
|
409,148 |
|
|
393,150 |
|
|
2023 Notes |
|
|
150,000 |
|
|
111,590 |
|
|
150,000 |
|
|
153,375 |
|
The Revolver (as defined in Note 5) is categorized as Level 3 in the valuation hierarchy as the debt is not publicly traded and no observable market exists to determine the fair value; however, the carrying value of the Revolver approximates fair value, as it is subject to short-term floating interest rates that approximate the rates available to the Company for those periods.
The fair value of the 2022 Notes (as defined in Note 5) is based on pricing that is readily available in the public market. Accordingly, the 2022 Notes are classified as Level 1 in the valuation hierarchy as the pricing is based on quoted market prices for the debt securities and is actively traded.
The fair value of the 2023 Notes (as defined in Note 5) is based on indicative pricing that is available in the public market. Accordingly, the 2023 Notes are classified as Level 2 in the valuation hierarchy as the pricing is based on quoted market prices for the debt securities but is not actively traded.
As a result of the Arkoma Divestiture that was pending as of June 30, 2017, the Company recognized an impairment charge of $161.9 million at June 30, 2017. This impairment was recorded for excess net book value over anticipated sales proceeds less costs to sell. Fair values of assets held for sale were determined based upon the anticipated sales proceeds less costs to sell, which resulted in a Level 2 classification. See Note 3, “Acquisitions and Divestitures” for further details regarding the “Arkoma Divestiture” and the related “Assets held for sale”.
|
|||
8. Asset Retirement Obligations
A summary of the Company’s Asset Retirement Obligations (“ARO”) for the six months ended June 30, 2017 is as follows:
|
(in thousands of dollars) |
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
20,058 |
|
|
Liabilities incurred |
|
|
563 |
|
|
Accretion of ARO liability |
|
|
467 |
|
|
Liabilities settled due to sale of related properties |
|
|
(60) |
|
|
Liabilities settled due to plugging and abandonment |
|
|
(56) |
|
|
Liabilities related to assets held for sale |
|
|
(1,143) |
|
|
Change in estimate |
|
|
(168) |
|
|
Total ARO balance at June 30, 2017 |
|
|
19,661 |
|
|
Less: Current portion of ARO |
|
|
(600) |
|
|
Total long-term ARO at June 30, 2017 |
|
$ |
19,061 |
|
|
|||
9. Stock-based Compensation
Management Unit Awards
Effective January 1, 2010, JEH implemented a management incentive plan that provided indirect awards of membership interests in JEH to members of senior management (“Management Units”). These awards had various vesting schedules, and a portion of the Management Units vested in a lump sum at the IPO date. In connection with the IPO, both the vested and unvested Management Units were converted into the right to receive JEH Units and shares of Class B common stock. The JEH Units (together with a corresponding number of shares of Class B common stock) will become exchangeable under this plan into a like number of shares of Class A common stock upon vesting or forfeiture. No new Management Units have been awarded since the IPO and no new JEH Units or shares of Class B common stock are created upon a vesting event. Grants listed below reflect the transfer of JEH Units that occurred upon forfeiture.
The following table summarizes information related to the vesting of Management Units as of June 30, 2017:
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant Date Fair Value |
|
|
|
|
|
JEH Units |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
90,762 |
|
$ |
15.00 |
|
|
Granted |
|
— |
|
|
15.00 |
|
|
Forfeited |
|
— |
|
|
15.00 |
|
|
Vested |
|
(43,377) |
|
|
15.00 |
|
|
Unvested at June 30, 2017 |
|
47,385 |
|
$ |
15.00 |
|
Stock compensation expense associated with the Management Units was $0.2 million and $0.4 million for the three and six months ended June 30, 2017, respectively, and $0.2 million and $0.8 million for the three and six months ended June 30, 2016, respectively, and is included in general and administrative expenses on the Company’s Consolidated Statement of Operations.
2013 Omnibus Incentive Plan
Under the Amended and Restated Jones Energy, Inc. 2013 Omnibus Incentive Plan (the “LTIP”), established in conjunction with the Company’s IPO and restated on May 4, 2016 following approval by the Company’s stockholders, the Company has reserved a total of 8,010,102 shares of Class A common stock for non-employee director, consultant, and employee stock-based compensation awards, as adjusted for the effects of the Special Stock Dividend and the preferred stock dividend paid in shares, as described in Note 11 “Stockholders’ and Mezzanine equity”.
The Company granted (i) performance share unit and restricted stock unit awards to certain officers and employees and (ii) restricted shares of Class A common stock to the Company’s non-employee directors under the LTIP during 2014, 2015, 2016 and 2017. During 2016 and 2017, the Company also granted performance unit awards to certain members of the senior management team under the LTIP.
All share and earnings per share information presented for awards made under the LTIP has been recast to retrospectively adjust for the effects of the 0.087423 per share Special Stock Dividend, as defined in Note 11, “Stockholders’ and Mezzanine equity”, distributed on March 31, 2017.
Restricted Stock Unit Awards
The Company has outstanding restricted stock unit awards granted to certain officers and employees of the Company under the LTIP. The fair value of the restricted stock unit awards is based on the value of the Company’s Class A common stock on the date of grant and is expensed on a straight-line basis over the applicable vesting period, which is typically three years.
The following table summarizes information related to the total number of units awarded to officers and employees as of June 30, 2017:
|
|
|
Restricted |
|
Weighted Average |
|
|
|
|
|
Stock Unit |
|
Grant Date Fair Value |
|
|
|
|
|
Awards |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
1,359,142 |
|
$ |
5.60 |
|
|
Adjustment (1) |
|
6,830 |
|
|
— |
|
|
Granted |
|
2,333,368 |
|
|
2.34 |
|
|
Forfeited |
|
(163,211) |
|
|
3.23 |
|
|
Vested |
|
(577,729) |
|
|
6.68 |
|
|
Unvested at June 30, 2017 |
|
2,958,400 |
|
$ |
2.93 |
|
|
(1) |
Increase of 0.002195 units for each unvested restricted stock unit awards at the time of the Company’s May 15, 2017 preferred stock dividend for the portion of such dividend paid in shares of the Company’s Class A common stock, as described in Note 11 “Stockholders’ and Mezzanine equity,” in accordance with the terms of the original awards. This increase is in addition to the adjustment for the effects of the Special Stock Dividend previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017. |
Stock compensation expense associated with the employee restricted stock unit awards was $1.0 million and $2.0 million for the three and six months ended June 30, 2017, respectively, and $0.9 million and $1.0 million for the three and six months ended June 30, 2016, respectively, and is included in general and administrative expenses on the Company’s Consolidated Statement of Operations.
Performance Share Unit Awards
The Company has outstanding performance share unit awards granted to certain members of the senior management team of the Company under the LTIP. Prior to the second quarter of 2016, the performance share unit awards were described in the Company’s filings as performance unit awards. During the second quarter of 2016, the Company created a new class of equity award, described below as a performance unit award, that is settled in cash rather than shares of the Company’s Class A common stock. As a result, references to performance unit awards in the Company’s filings prior to the second quarter of 2016 refer to this description of performance share unit awards.
Upon the completion of the applicable three-year performance period, each recipient may vest in a number of performance share units. The percent of awarded performance share units in which each recipient vests at such time, if any, will range from 0% to 200% based on the Company’s total shareholder return relative to an industry peer group over the applicable three-year performance period. Each vested performance share unit is exchangeable for one share of the Company’s Class A common stock. The grant date fair value of the performance share units was determined using a Monte Carlo simulation model, which results in an estimated percentage of performance share units earned. The fair value of the performance share units is expensed on a straight-line basis over the applicable three-year performance period.
The following assumptions were used for the Monte Carlo model to determine the grant date fair value and associated stock-based compensation expense of the performance share unit awards granted during the six months ended June 30, 2017:
|
|
|
2017 |
|
|
|
|
Performance |
|
|
|
|
Share |
|
|
|
|
Unit Awards |
|
|
Forecast period (years) |
|
2.71 |
|
|
Risk-free interest rate |
|
1.34 |
% |
|
Jones stock price volatility |
|
78.93 |
% |
For the performance share units granted during the six months ended June 30, 2017, the Monte Carlo simulation
model resulted in approximately 29% of performance share units expected to be earned.
The following table summarizes information related to the total number of performance share units awarded to the senior management team as of June 30, 2017:
|
|
|
Performance |
|
Weighted Average |
|
|
|
|
|
Share Unit |
|
Grant Date Fair Value |
|
|
|
|
|
Awards |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
942,073 |
|
$ |
6.25 |
|
|
Adjustment (1) |
|
4,067 |
|
|
— |
|
|
Granted |
|
519,562 |
|
|
2.24 |
|
|
Forfeited |
|
(23,552) |
|
|
9.42 |
|
|
Vested |
|
— |
|
|
— |
|
|
Unvested at June 30, 2017 |
|
1,442,150 |
|
$ |
4.74 |
|
|
(1) |
Increase of 0.002195 units for each unvested performance share unit award at the time of the Company’s May 15, 2017 preferred stock dividend for the portion of such dividend paid in shares of the Company’s Class A common stock, as described in Note 11 “Stockholders’ and Mezzanine equity,” in accordance with the terms of the original awards. This increase is in addition to the adjustment for the effects of the Special Stock Dividend previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017. |
Stock compensation expense associated with the performance share unit awards was $0.5 million and $1.0 million for the three and six months ended June 30, 2017, respectively, and $0.6 million and $1.0 million for the three and six months ended June 30, 2016, respectively, and is included in general and administrative expenses on the Company’s Consolidated Statement of Operations.
Performance Unit Awards
The value of awarded performance units in which each recipient vests at such time, if any, will range from $0.00 to $200.00 per performance unit based on the Company’s total shareholder return relative to an industry peer group over the applicable three-year performance period. For accounting purposes, the performance units are treated as a liability award with the liability being re-measured at the end of each reporting period. Therefore, the expense associated with these awards is subject to volatility until the payout is finally determined at the end of the performance period. The value of the performance units was determined using a Monte Carlo simulation model, as of the grant date, which resulted in an estimated final value upon vesting of $0.4 and $1.3 million for awards made during 2017 and 2016, respectively. The fair value measured as of June 30, 2017 was $0.8 million.
The following assumptions were used for the Monte Carlo model to determine the grant date fair value and associated stock-based compensation expense of the performance unit awards granted during the six months ended June 30, 2017:
|
|
|
2017 |
|
|
|
|
Performance |
|
|
|
|
Unit Awards |
|
|
Forecast period (years) |
|
2.71 |
|
|
Risk-free interest rate |
|
1.34 |
% |
|
Jones stock price volatility |
|
78.93 |
% |
For the performance units granted during the six months ended June 30, 2017, the Monte Carlo simulation
model resulted in an expected payout of $28.25 per performance unit as of the grant date.
Stock compensation expense associated with the performance unit awards was an offset to expense of less than $0.1 million for the three and six months ended June 30, 2017, respectively, as a result of the decrease in market value of the outstanding awards and less than $0.1 million for the three and six months ended June 30, 2016, and is included in general and administrative expenses on the Company’s Consolidated Statement of Operations. As of June 30, 2017, $0.5 million of unrecognized compensation expense related to the performance unit awards, subject to re-measurement and adjustment for the change in estimated final value as of the end of each reporting period, is expected to be recognized over the remaining weighted average service period of 1.9 years.
Restricted Stock Awards
The Company has outstanding restricted stock awards granted to the non-employee members of the Board of Directors of the Company under the LTIP. The restricted stock will vest upon the director serving as a director of the Company for a one-year service period in accordance with the terms of the award. The fair value of the awards was based on the price of the Company’s Class A common stock on the date of grant.
The following table summarizes information related to the total value of the awards to the Board of Directors as of June 30, 2017:
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Restricted |
|
Grant Date Fair Value |
|
|
|
|
|
Stock Awards |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
152,050 |
|
$ |
3.68 |
|
|
Granted |
|
180,000 |
|
|
2.25 |
|
|
Forfeited |
|
— |
|
|
— |
|
|
Vested |
|
(152,050) |
|
|
3.68 |
|
|
Unvested at June 30, 2017 |
|
180,000 |
|
$ |
2.25 |
|
Stock compensation expense associated with awards to the members of the Board of Directors was $0.1 million and $0.3 million for the three and six months ended June 30, 2017, respectively, and $0.2 million and $0.3 million for the three and six months ended June 30, 2016, respectively, and is included in general and administrative expenses on the Company’s Consolidated Statement of Operations.
|
|||
10. Income Taxes
The Company records federal and state income tax liabilities associated with its status as a corporation. The Company recognizes a tax liability on its share of pre-tax book income, exclusive of the non-controlling interest. JEH is not subject to income tax at the federal level and only recognizes Texas franchise tax expense.
The Company’s effective tax rate was 1.6% and 1.6% for the three and six months ended June 30, 2017, respectively, and 17.4% and 14.3% for the three and six months ended June 30, 2016, respectively. The effective tax rate reduction is primarily due to the effect of the valuation allowance recorded against the Company’s deferred tax assets. The effective rate differs from the statutory rate of 35% due to net income allocated to the non-controlling interest, percentage depletion, state income taxes, the valuation allowance recorded against deferred tax assets, and other permanent differences between book and tax accounting.
The Company’s income tax provision was a benefit of $2.4 million for the three and six months ended June 30, 2017, respectively, and a benefit of $12.4 million and $1.7 million for the three and six months ended June 30, 2016, respectively.
The following table summarizes information related to the allocation of the income tax provision between the controlling and non-controlling interests:
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
(in thousands of dollars) |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
Jones Energy, Inc. |
|
$ |
(2,414) |
|
$ |
(12,215) |
|
$ |
(2,400) |
|
$ |
(1,646) |
|
|
Non-controlling interest |
|
|
(5) |
|
|
(173) |
|
|
2 |
|
|
(39) |
|
|
Income tax provision (benefit) |
|
$ |
(2,419) |
|
$ |
(12,388) |
|
$ |
(2,398) |
|
$ |
(1,685) |
|
The Company had deferred tax assets for its federal and state net operating loss carry forwards at June 30, 2017 recorded in its deferred taxes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of June 30, 2017, we have a valuation allowance of $51.8 million as a result of management’s assessment of the realizability of federal and state deferred tax assets. Management believes that there will be sufficient future taxable income based on the reversal of temporary differences to enable utilization of substantially all other tax carryforwards.
Tax Receivable Agreement
In connection with the IPO, the Company entered into a Tax Receivable Agreement (the “TRA”) which obligates the Company to make payments to certain current and former owners equal to 85% of the applicable cash savings that the Company realizes as a result of tax attributes arising from exchanges of JEH Units and shares of the Company’s Class B common stock held by those owners for shares of the Company’s Class A common stock. The Company will retain the benefit of the remaining 15% of these tax savings. At the time of an exchange, the company records a liability to reflect the future payments under the TRA.
The actual amount and timing of payments to be made under the TRA will depend upon a number of factors, including the amount and timing of taxable income generated in the future, changes in future tax rates, the use of loss carryovers, and the portion of the Company’s payments under the TRA constituting imputed interest. In the event that the Company records a valuation allowance against its deferred tax assets associated with an exchange, the TRA liability will also be reduced as the payment of the TRA liability is dependent on the realizability of the deferred tax assets. As of June 30, 2017 and December 31, 2016, the amount of the TRA liability was reduced by $33.2 million and $2.7 million, respectively, as a result of the valuation allowance recorded against the Company’s deferred tax assets. To the extent the Company does not realize all of the tax benefits in future years or in the event of a change in future tax rates, this liability may change.
As of June 30, 2017 and December 31, 2016, the Company had recorded a TRA liability of $12.4 million and $43.0 million, respectively, for the estimated payments that will be made to the Class B shareholders who have exchanged shares, after adjusting for the TRA liability reduction, along with corresponding deferred tax assets, net of valuation allowance, of $14.5 million, and $50.6 million, respectively, as a result of the increase in tax basis generated arising from such exchanges.
As of June 30, 2017, the Company had not made any significant payments under the TRA to Class B shareholders who have exchanged JEH Units and Class B common stock for Class A common stock. The Company anticipates making a payment of approximately $0.6 million under the TRA with respect to cash savings that the Company will realize on its 2016 tax returns as a result of tax attributes arising from prior exchanges, to be paid in the first quarter of 2018.
Cash Tax Distributions
The holders of JEH Units, including the Company, incur U.S. federal, state and local income taxes on their share of any taxable income of JEH. Under the terms of its operating agreement, JEH is generally required to make quarterly pro-rata cash tax distributions to its unitholders (including us) based on income allocated to its unitholders through the end of each relevant quarter, as adjusted to take into account good faith projections by the Company of taxable income or loss for the remainder of the calendar year, to the extent JEH has cash available for such distributions and subject to certain other restrictions.
A Special Committee of the Board of Directors comprised solely of directors who do not have a direct or indirect interest in such distribution approved, and JEH made, aggregate cash tax distributions during the three and six months ended June 30, 2017 of $0.0 million and $1.7 million, respectively. Distributions during the year were made pro-rata to all members of JEH, and included a $1.1 million payment to the Company and a $0.6 million payment to JEH unitholders other than the Company. During the three and six months ended June 30, 2016 the Company made aggregate cash tax distributions of $20.0 million to its unitholders towards its total 2016 projected tax distribution obligation. The distributions were made pro-rata to all members of JEH, and included a $9.9 million payment to the Company, and a $10.1 million payment to JEH unitholders other than the Company. All tax distributions were paid as a result of JEH’s 2016 taxable income.
|
|||
11. Stockholders’ and Mezzanine equity
Stockholders’ equity is comprised of two classes of common stock, Class A common stock and Class B common stock. The Class B common stock is held by the owners of JEH prior to the Company’s IPO and can be exchanged (together with a corresponding number of units representing membership interests in JEH Units) for shares of Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions. The Class B common stock has no economic rights but entitles its holders to one vote on all matters to be voted on by the Company’s stockholders generally.
The Company has classified the Series A preferred stock as mezzanine equity based upon the terms and conditions that contain various redemption and conversion features. For a description of these features, please see below under “—Offering of 8.0% Series A Perpetual Convertible Preferred Stock.”
Equity Distribution Agreement
On May 24, 2016, the Company and JEH entered into an Equity Distribution Agreement (“Equity Distribution Agreement”) with Citigroup Global Markets Inc. and Wells Fargo Securities, LLC (each, a “Manager” and collectively, the “Managers”). Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time through the Managers, as the Company’s sales agents, the Company’s Class A common stock having an aggregate offering price of up to $73.0 million (the “Class A Shares”). Under the terms of the Equity Distribution Agreement, the Company may also sell Class A Shares from time to time to any Manager as principal for its own account at a price to be agreed upon at the time of sale. Any sale of Class A Shares to a Manager as principal would be pursuant to the terms of a separate terms agreement between the Company and such Manager. Sales of the Class A Shares, if any, will be made by means of ordinary brokers’ transactions, to or through a market maker or directly on or through an electronic communication network, a “dark pool” or any similar market venue, or as otherwise agreed by the Company and one or more of the Managers.
During the three and six months ended June 30, 2017, the Company sold approximately 2.5 million and 3.7 million Class A Shares, respectively, under the Equity Distribution Agreement for net proceeds of approximately $5.6 million ($5.8 million gross proceeds, net of approximately $0.2 million in commissions and professional services expenses) and $8.4 million ($8.7 million gross proceeds, net of approximately $0.3 million in commissions and professional services expenses), respectively. The Company used the net proceeds for general corporate purposes. As of June 30, 2017, approximately $62.2 million in aggregate offering proceeds remained available to be issued and sold under the Equity Distribution Agreement.
Offering of Class A Common Stock
On August 26, 2016, the Company issued 21,000,000 shares of Class A common stock pursuant to an underwritten public offering, and on September 12, 2016 the Company issued an additional 3,150,000 shares of Class A common stock in connection with the exercise of the underwriters’ over-allotment option. The total net proceeds (after underwriters’ discounts and commissions, but before estimated expenses) of the offering, including the exercise of the over-allotment option, was $64.0 million.
Offering of 8.0% Series A Perpetual Convertible Preferred Stock
On August 26, 2016, the Company issued 1,840,000 shares of Series A preferred stock pursuant to an underwritten public offering for total net proceeds (after underwriters’ discounts and commissions but before expenses) of $88.3 million.
Holders of Series A preferred stock are entitled to receive, when as and if declared by the Company’s Board of Directors, cumulative dividends at the rate of 8.0% per annum (the “dividend rate”) per share on the $50.00 liquidation preference per share of the Series A Preferred Stock, payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, beginning on November 15, 2016. Dividends may be paid in cash or, subject to certain limitations, in Class A common stock, or a combination thereof.
Under the terms of the Series A preferred stock, the Company’s ability to declare or pay dividends or make distributions on, or purchase, redeem or otherwise acquire for consideration, shares of the Company’s Class A common stock, or any junior stock or parity stock currently outstanding or issued in the future, will be subject to certain restrictions in the event that the Company does not pay in full or declare and set aside for payment in full all accrued and unpaid dividends on the Series A preferred stock (including certain unpaid excess cash payment amounts excused from payment as a dividend due to restrictions in credit facilities or other indebtedness or legal requirements (“Unpaid Excess Cash Payment Amounts”)).
Each share of Series A preferred stock has a liquidation preference of $50.00 per share and is convertible, at the holder’s option at any time, into approximately 17.0683 shares of Class A common stock after adjusting the conversion ratio for the effects of the Special Stock Dividend, as defined in Note 11, “Stockholders’ and Mezzanine equity”, (which is equivalent to a conversion price of approximately $2.93 per share after adjusting for the effects of the Special Stock Dividend), subject to specified further adjustments and limitations as set forth in the certificate of designations for the Series A preferred stock. Based on the adjusted conversion rate and the full exercise of the Preferred Stock Underwriters’ over-allotment option, approximately 31.4 million shares of Class A common stock would be issuable upon conversion of all the Series A preferred stock.
On or after August 15, 2021, the Company may, at its option, give notice of its election to cause all outstanding shares of Series A preferred stock to be automatically converted into shares of Class A common stock at the conversion rate, if the closing sale price of the Class A common stock equals or exceeds 175% of the conversion price for at least 20 trading days in a period of 30 consecutive trading days.
On August 15, 2024 (the “designated redemption date”), each holder of Series A preferred stock may require us to redeem any or all Series A preferred stock held by such holder outstanding on the designated redemption date at a redemption price equal to a liquidation preference of $50.00 per share plus all accrued dividends on the shares up to but excluding the designated redemption date that have not been paid plus any Unpaid Excess Cash Payment Amounts (the “redemption price”). At our option, the redemption price may be paid in cash or, subject to certain limitations, in Class A common stock, or a combination thereof.
Except as required by law or the Company’s certificate of incorporation, which includes the certificate of designations for the Series A preferred stock, the holders of Series A preferred stock have no voting rights (other than with respect to certain matters regarding the Series A preferred stock or when dividends payable on the Series A preferred stock have not been paid for an aggregate of six quarterly dividend periods, or more, whether or not consecutive, as provided in the certificate of designations for the Series A preferred stock).
The Series A preferred stock is classified as mezzanine equity on the Company’s Consolidated Balance Sheet and is not listed on a national stock exchange.
A summary of the Company’s Mezzanine equity for the six months ended June 30, 2017 is as follows:
|
(in thousands of dollars) |
|
|
|
|
|
Mezzanine equity at December 31, 2016 |
|
$ |
88,975 |
|
|
Dividends on preferred stock, net |
|
|
— |
|
|
Accretion on preferred stock |
|
|
313 |
|
|
Mezzanine equity at June 30, 2017 |
|
$ |
89,288 |
|
Preferred Stock Dividends
On January 19, 2017, the Company’s Board of Directors declared a quarterly cash dividend per share equal to 8.0% based on the liquidation preference of $50.00 per share on an annualized basis, or $1.00 per share, on the Series A preferred stock. This dividend is for the period beginning on the last payment date of November 15, 2016 through February 14, 2017 and was paid in cash on February 15, 2017 to shareholders of record as of February 1, 2017.
On April 17, 2017, the Company’s Board of Directors declared a quarterly dividend per share equal to 8.0% based on the liquidation preference of $50.00 per share on an annualized basis, or $1.00 per share, on the Series A preferred stock. On May 15, 2017, the dividend was paid in a combination of cash and the Company’s Class A common stock, with the cash component equal to $0.83 per share and the stock component equal to $0.17 per share. The price per share of the Class A common stock used to determine the number of shares issued was equal to 95% of the average volume-weighted average price per share for each day during the five-consecutive day trading period ending immediately prior to the payment date. This dividend was for the period beginning on the last payment date of February 15, 2017 through May 14, 2017 to shareholders of record as of May 1, 2017.
Special Stock Dividend
On March 31, 2017, the Company paid a stock dividend (the “Special Stock Dividend”) of 0.087423 shares of the Class A common stock to holders of record as of March 15, 2017. From time-to-time, JEH makes cash distributions to the holders of JEH Units to cover tax obligations that may occur as a result of any net taxable income of JEH allocable to holders of JEH Units. As a holder of JEH Units, the Company has received such cash distributions from JEH in excess of the amount required to satisfy the Company’s associated tax obligations. As a result, the Company used the excess cash of approximately $17.5 million in the aggregate to acquire newly-issued JEH Units from JEH.
The Special Stock Dividend was distributed in order to equalize the number of shares of Class A common stock outstanding to the number of JEH Units held by the Company, and the aggregate number of shares of Class A common stock issued in the Special Stock Dividend equaled the number of additional JEH Units the Company purchased from JEH. The Company purchased 4,999,927 JEH Units at a price of $3.50 per share, which is the volume weighted average price per share of the Class A common stock for the five trading days ended February 28, 2017. Immaterial cash payments were made in lieu of fractional shares. The comparative earnings per share information has been recast to retrospectively adjust for the effects of the Special Stock Dividend.
|
|||
13. Related Parties
Related Party Transactions
Transactions with Our Executive Officers, Directors and 5% Stockholders
Monarch Natural Gas Holdings, LLC Natural Gas Sale and Purchase Agreement
On May 7, 2013, the Company entered into a natural gas sale and purchase agreement with Monarch Natural Gas, LLC, (“Monarch”), under which Monarch has the first right to gather the natural gas the Company produces from dedicated properties, process the NGLs from this natural gas production and market the processed natural gas and extracted NGLs. Under the Monarch agreement, the Company is paid a specified percentage of the value of the NGLs extracted and sold by Monarch, based on a set liquids recovery percentage, and the amount received from the sale of the residue gas, after deducting a fixed volume for fuel, lost and unaccounted-for gas. The Company produced approximately 1.4 MMBoe of natural gas and NGLs for the year ended December 31, 2014, from the properties that became subject to the Monarch agreement. During the year ended December 31, 2014, the Company recognized $37.0 million of revenue associated with the aforementioned natural gas and NGL production. Effective May 1, 2015, the rights to gather natural gas under the sale and purchase agreement transferred from Monarch to Enable Midstream Partners LP, (“Enable”), an unaffiliated third-party. Prior to closing of the transfer of these rights, the Company produced approximately 1.0 MMBoe of natural gas and NGLs for the year ended December 31, 2015 from the properties that became subject to the Monarch agreement for which the Company recognized $10.6 million of revenue. The revenue, for all years mentioned, is recorded in Oil and gas sales on the Company’s Consolidated Statement of Operations. The initial term of the agreement, which remains unchanged by the transfer to Enable, runs for 10 years from the effective date of September 1, 2013.
At the time the Company entered into the 2013 Monarch agreement, Metalmark Capital owned approximately 81% of the outstanding equity interests of Monarch. In addition, Metalmark Capital beneficially owns in excess of five percent of the Company’s outstanding equity interests and two of our former directors, Howard I. Hoffen and Gregory D. Myers, are managing directors of Metalmark Capital and were directors at the time the Company entered into the 2013 Monarch agreement.
In connection with the Company’s entering into the 2013 Monarch agreement, Monarch issued to JEH equity interests in Monarch, having an estimated fair value of $15.0 million, in return for marketing services to be provided throughout the term of the agreement. The Company recorded this amount as deferred revenue which is being amortized on an estimated units-of-production basis commencing in September 2013, the first month of product sales to Monarch. The Company amortized $0.5 million and $0.9 million, respectively, of the deferred revenue balance during the three and six months ended June 30, 2017, and $0.6 million and $1.2 million, respectively, of the deferred revenue balance during the three and six months ended June 30, 2016. This revenue is recorded in Other revenues on the Company’s Consolidated Statement of Operations.
Following the issuance of $15.0 million Monarch equity interests to JEH, JEH assigned $2.4 million of the equity interests to Jonny Jones, the Company’s chief executive officer and chairman of the Board of Directors, and reserved $2.6 million of the equity interests for future distribution through an incentive plan to certain of the Company’s officers, including Mike McConnell, Robert Brooks and Eric Niccum. The remaining $10.0 million of Monarch equity interests was distributed to certain of the Class B shareholders, which included, among others, Metalmark Capital, the Jones family entities, and certain of the Company’s officers and directors, including Jonny Jones, Mike McConnell and Eric Niccum. As of June 30, 2017, equity interests in Monarch of $0.7 million are included in Other assets on the Company’s Consolidated Balance Sheet. During the six months ended June 30, 2017, no equity interests were distributed to management under the incentive plan. The Company recognized expense of $0.1 million and $0.2 million during the three and six months ended June 30, 2017, respectively, in connection with the incentive plan.
In September 2014, the Company signed a 10-year oil gathering and transportation agreement with Monarch Oil Pipeline LLC, pursuant to which Monarch Oil Pipeline LLC built, at its expense, a new oil gathering system and connected the gathering system to dedicated Company leases in Texas. At the time the Company entered into the agreement, Metalmark Capital owned the majority of the outstanding equity interests of Monarch Oil Pipeline LLC and/or its parent. The system began service during the fourth quarter of 2015 and provides connectivity to both a regional refinery market as well as the Cushing market hub. The Company incurred gathering fees, which were paid to Monarch Oil Pipeline LLC, of $0.6 million and $1.3 million for the three and six months ended June 30, 2017, respectively, associated with the approximately 0.3 MMBoe and 0.6 MMBoe, respectively, of oil production transported under the agreement. These costs are recorded as an offset to Oil and gas sales in the Company’s Consolidated Statement of Operations. The aforementioned production was recognized as Oil and gas sales on the Company’s Consolidated Statement of Operations at the time it was sold to the purchasers, who are unaffiliated third parties, after passing through the gathering and transportation system. The audit committee of the Board of Directors reviewed and approved the terms of the agreement with Monarch Oil Pipeline LLC.
Purchases of Senior Unsecured Notes
On February 29, 2016, JEH and Jones Energy Finance Corp. purchased $50.0 million principal amount of their outstanding 2023 Notes from investment funds managed by Magnetar Capital and its affiliates, which investment funds collectively then owned more than 5% of a class of voting securities of the Company, for approximately $23.3 million excluding accrued interest and including any associated fees. On the same day, JEH and Jones Energy Finance Corp. purchased an additional $50.0 million principal amount of their outstanding 2023 Notes from investment funds managed by Blackstone Group Management L.L.C. and its affiliates, which investment funds collectively then owned more than 5% of a class of voting securities of the Company, for approximately $23.3 million excluding accrued interest and including any associated fees. In conjunction with the extinguishment of this $100.0 million principal amount of debt, JEH recognized cancellation of debt income of $48.3 million on a pre-tax basis. This income is recorded in Gain on debt extinguishment on the Company’s Consolidated Statement of Operations.
Issuance of Class A Shares
In connection with the August 2016 issuance of Class A common stock pursuant to an underwritten public offering as described above under “Item 11. Stockholders’ and Mezzanine equity—Offering of Class A Common Stock,” affiliates of JVL Advisors, L.L.C. (“JVL”), who then owned more than 5% of a class of voting securities of the Company, purchased 9,025,270 shares of Class A common stock, prior to adjustment for the effects of the 0.087423 per share Special Stock Dividend, as defined in Note 11, “Stockholders’ and Mezzanine equity”, in the offering, for gross proceeds to the Company of $25.0 million, before underwriting discounts and commissions of $1.1 million.
Following its purchase in the offering, JVL owned in excess of 15% of our outstanding voting stock. As a result, the Company entered into a letter agreement with JVL (the “JVL Letter Agreement”) in connection with the offering. The JVL Letter Agreement approved, pursuant to Section 203 of the Delaware General Corporation Law (“Section 203”), the purchase of shares of Class A common stock in the offering by JVL. This approval resulted in JVL not being subject to the restrictions on “business combinations” contained in Section 203. In consideration of such approval, JVL agreed that, among other things:
|
· |
it will not acquire any material assets of the Company; |
|
· |
it will not become the owner of more than 19.9% of the Company’s outstanding voting stock (other than as a result of actions taken solely by the Company) without the prior approval of the Company’s independent directors who are not affiliated with JVL; and |
|
· |
it will not engage in any “business combination” (as defined in the JVL Letter Agreement). |
On May 3, 2017, the Company amended and restated its registration rights agreement dated August 29, 2013 (as amended and restated, the “Restated Registration Rights Agreement”) to add JVL as a party in order to facilitate an orderly distribution of JVL’s shares of Class A common stock in the future, a copy of which was filed on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 3, 2017.
Issuance of Series A Preferred Stock
In connection with the August 2016 issuance of Series A preferred stock pursuant to an underwritten public offering as described above under “Item 11. Stockholders’ and Mezzanine equity—Offering of 8.0% Series A Perpetual Convertible Preferred Stock,” affiliates of Metalmark, who then owned more than 5% of a class of voting securities of the Company and had two representatives on our Board of Directors, purchased 200,000 shares of Series A preferred stock in the offering, for gross proceeds to the Company of $10.0 million, before underwriting discounts and commissions of $400,000.
Amended and Restated Registration Rights and Stockholders Agreement
On May 2, 2017, we entered into an Amended and Restated Registration Rights and Stockholders Agreement (the “Restated Agreement”) with certain entities affiliated with the Jones family (the “Jones Family Entities”), Metalmark and JVL.
The Restated Agreement amends and restates in its entirety that certain Registration Rights and Stockholders Agreement, dated July 29, 2013 (the “Original Agreement”), by and among the Company, Metalmark and the Jones Family Entities, to, among other things, provide JVL with certain rights, in addition to those rights granted to Metalmark and the Jones Family Entities in the Original Agreement, to require the Company to register the sale of any number of JVL’s shares of Class A common stock. JVL shall have the right to cause no more than one such required or “demand” registration, which shall be requested by a majority in interest of the JVL holders who hold certain equity securities of the Company or securities convertible or exchangeable into equity securities of the Company. The Company is not obligated to affect any demand registration in which the anticipated aggregate offering price included in such offering is equal to or less than $50,000,000 ($25,000,000 where the registration is on a Form S-3). Furthermore, if, at any time, the Company proposes to register an offering of Class A common stock (subject to certain exceptions) for the Company’s own account, then it must give prompt notice to Metalmark, JVL and the Jones Family Entities to allow them to include a specified number of their shares in that registration statement. These registration rights are subject to certain conditions and limitations, including the right of the underwriters to limit the number of shares to be included in a registration and the Company’s right to delay or withdraw a registration statement under certain circumstances. The Company will generally be obligated to pay all registration expenses in connection with the registration obligations, regardless of whether a registration statement is filed or becomes effective. The Restated Agreement also includes customary provisions dealing with indemnification, contribution and allocation of expenses.
|
|||
14. Commitments and Contingencies
Litigation
The Company is subject to legal proceedings and claims that arise in the ordinary course of its business. When applicable, we record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations, or liquidity.
In an action filed on June 12, 2015 in the 31st District Court of Hemphill County, Texas, Donna Kim Flowers and Mitchell Kirk Flowers v. Jones Energy, LLC f/k/a Jones Energy Limited, LLC f/k/a Jones Energy, Ltd. (Case No. 7225), the Company was sued by Donna Kim Flowers and Mitchell Kirk Flowers (the “plaintiffs”). The plaintiffs own surface rights to property located in Hemphill County, Texas. The mineral rights are leased to third parties, and the Company is the operator of the Oil and Gas Mineral Lease. On May 28, 2010, the plaintiffs and the Company entered into a Surface Use Agreement concerning the Company’s operations on the property, which require the Company to minimize disruption and damage to the plaintiffs’ surface rights. The plaintiffs allege that the Company is in breach of such contract, and seek monetary damages. In June 2016, the Company presented a settlement offer to the plaintiffs. As a result of this settlement offer, the Company accrued $1.5 million related to its estimated obligation under this settlement offer. This accrual was included in accrued liabilities on the Company’s Consolidated Balance Sheet as of December 31, 2016, and the charge was recorded as general and administrative expense on the Company’s Consolidated Statement of Operations during the three months ended June 30, 2016. In June 2017, the Company presented a revised settlement offer to the plaintiffs and the plaintiff accepted. The settlement was paid in cash during June 2017. Upon settlement, the Company recognized an additional charge of $1.4 million which was recorded as general and administrative expense on the Company’s Consolidated Statement of Operations during the three months ended June 30, 2017.
|
|||
15. Subsequent Events
Preferred Stock Dividend Declared
On July 13, 2017, the Company’s Board of Directors declared a quarterly dividend per share equal to 8.0% based on the liquidation preference of $50.00 per share on an annualized basis, or $1.00 per share, on the Series A preferred stock, to be paid entirely in shares of Class A common stock (the “August Preferred Dividend”). The price per share of the Class A common stock used to determine the number of shares issued will equal to 95% of the average volume-weighted average price per share for each day during the 5-consecutive day trading period ending immediately prior to the payment date. The August Preferred Dividend will be paid on August 15, 2017 for the period beginning on the last payment date of May 15, 2017 through August 14, 2017 to shareholders of record as of August 1, 2017.
Arkoma Divestiture
On August 1, 2017, JEH closed the previously announced Arkoma Divestiture for a purchase price of $65.0 million, subject to customary adjustments. Upon closing, the Company’s borrowing base on the Revolver was reduced to $375.0 million.
Class B to Class A Share Exchanges
On July 7, 2017, certain Class B shareholders exchanged an aggregate of 6,105,148 shares of Class B common stock (together with a corresponding number of JEH Units) for shares of Class A common stock on a one-for-one basis (the “July Exchanges”). As of June 30, 2017 and December 31, 2016, the Company had recorded a TRA liability of $12.4 million and $43.0 million, respectively, for the estimated payments that will be made to Class B shareholders who have exchanged shares of Class B common stock, after adjusting for the TRA liability reduction as a result of the increase in tax basis arising from such exchanges. After the July Exchanges, the gross TRA liability increased by approximately $18.7 million. The increase in TRA liability will be offset entirely as a result of the valuation allowance recorded against the deferred asset generated in the exchange that would lead to payment of such TRA liability.
|
|||
16. Subsidiary Guarantors
The 2022 Notes and the 2023 Notes are guaranteed on a senior unsecured basis by the Company and by all of JEH’s current subsidiaries (except Jones Energy Finance Corp. and two immaterial subsidiaries) and certain future subsidiaries, including any future subsidiaries that guarantee any indebtedness under the Revolver. Each subsidiary guarantor is 100% owned by JEH, and all guarantees are full and unconditional, subject to customary exceptions pursuant to the indentures governing our 2022 Notes and 2023 Notes, as discussed below, and joint and several with all other subsidiary guarantees and the parent guarantee. Any subsidiaries of JEH other than the subsidiary guarantors and Jones Energy Finance Corp. are immaterial.
As of December 31, 2016, the 2022 Notes and the 2023 Notes were guaranteed on a senior unsecured basis by the Company and by all of its significant subsidiaries, other than Nosley SCOOP, LLC and Nosley Acquisition, LLC. These subsidiaries have since become guarantors during the first quarter of 2017 and are therefore presented accordingly in the accompanying condensed consolidated guarantor financial information.
Guarantees of the 2022 Notes and 2023 Notes will be released under certain circumstances, including (i) in connection with any sale or other disposition of (a) all or substantially all of the properties or assets of a guarantor (including by way of merger or consolidation) or (b) all of the capital stock of such guarantor, in each case, to a person that is not the Company or a restricted subsidiary of the Company, (ii) if the Company designates any restricted subsidiary that is a guarantor as an unrestricted subsidiary, (iii) upon legal defeasance, covenant defeasance or satisfaction and discharge of the applicable indenture, or (iv) at such time as such guarantor ceases to guarantee any other indebtedness of the Company or any other guarantor.
The Company is a holding company whose sole material asset is an equity interest in JEH. The Company is the sole managing member of JEH and is responsible for all operational, management and administrative decisions related to JEH’s business. In accordance with JEH’s limited liability company agreement, the Company may not be removed as the sole managing member of JEH.
As of June 30, 2017, the Company held 66,649,057 JEH Units and all of the preferred units representing membership interests in JEH, and the remaining 29,823,927 JEH Units are held by the Class B shareholders. The Class B shareholders have no voting rights with respect to their economic interest in JEH.
The Company has two classes of common stock, Class A common stock, which was sold to investors in the IPO, and Class B common stock, and one series of preferred stock, Series A preferred stock. Pursuant to the Company’s certificate of incorporation, each share of Class A common stock is entitled to one vote per share, and the shares of Class A common stock are entitled to 100% of the economic interests in the Company. Each share of Class B common stock has no economic rights in the Company, but entitles its holder to one vote on all matters to be voted on by the Company’s stockholders generally. Except as required by law or the Company’s certificate of incorporation, which includes the certificate of designations for the Series A preferred stock, the holders of Series A preferred stock have no voting rights (other than with respect to certain matters regarding the Series A preferred stock or when dividends payable on the Series A preferred stock have not been paid for an aggregate of six quarterly dividend periods, or more, whether or not consecutive, as provided in the certificate of designations for the Series A preferred stock).
In connection with a reorganization that occurred immediately prior to the IPO, each Existing Owner was issued a number of shares of Class B common stock that was equal to the number of JEH Units that such Class B shareholders held. Holders of the Company’s Class A common stock and Class B common stock generally vote together as a single class on all matters presented to the Company’s stockholders for their vote or approval. Accordingly, the Class B shareholders collectively have a number of votes in the Company equal to the aggregate number of JEH Units that they hold.
The Class B shareholders have the right, pursuant to the terms of an exchange agreement by and among the Company, JEH and each of the Class B shareholders (the “Exchange Agreement”), to exchange their JEH Units (together with a corresponding number of shares of Class B common stock) for shares of Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications and other similar transactions. As a result, the Company expects that over time the Company will have an increasing economic interest in JEH as Class B common stock and JEH Units are exchanged for Class A common stock. Moreover, any transfers of JEH Units outside of the Exchange Agreement (other than permitted transfers to affiliates) must be approved by the Company. The Company intends to retain full voting and management control over JEH.
During the preparation of the condensed consolidating financial information of Jones Energy, Inc. and Subsidiaries as of and for the three and six months period ended June 30, 2017, it was determined that the Issuer Investment in subsidiaries and the related Eliminations at December 31, 2016 as filed in the Company’s 2016 Form 10-K were improperly calculated and understated by $453.2 million. Additionally, it was determined that the Guarantor Subsidiaries Intercompany payable balances and the related Eliminations and the Issuer Intercompany receivable and the related Eliminations at December 31, 2016 as filed in the Company’s 2016 Form 10-K were improperly calculated and overstated by $453.2 million and $80.0 million, respectively. In addition, it was determined that the Issuer Equity interest in income (loss) and the related Eliminations for the three and six months period ended June 30, 2016 as filed in the Company’s second quarter 2016 Form 10-Q were improperly calculated and understated by $35.7 million and $5.8 million, respectively. Lastly, it was determined that the Issuer Adjustments to reconcile net income (loss) to net cash provided by operating activities and the related Eliminations for the six months period ended June 30, 2016 as filed in the Company’s second quarter 2016 Form 10-Q was improperly calculated and overstated by $5.8 million.
The errors, which the Company has determined are not material to this disclosure, had no impact on the total assets of the Parent or the Guarantor Subsidiaries and are eliminated upon consolidation, and therefore have no impact on the Company’s consolidated financial condition, results of operations or cash flows.
The Company has revised the Condensed Consolidating Balance Sheets for the Issuer, Guarantor Subsidiaries and Eliminations as of December 31, 2016, the Condensed Consolidating Income Statements for the Issuer and Eliminations for the three and six months period ended June 30, 2016 and the Condensed Consolidating Statement of Cash Flows for the six months ended June 30, 2016 to correct for these errors.
Jones Energy, Inc.
Condensed Consolidating Balance Sheet
June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
3,254 |
|
$ |
781 |
|
$ |
2,199 |
|
$ |
20 |
|
$ |
— |
|
$ |
6,254 |
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales |
|
|
— |
|
|
— |
|
|
24,557 |
|
|
— |
|
|
— |
|
|
24,557 |
|
|
Joint interest owners |
|
|
— |
|
|
— |
|
|
9,032 |
|
|
— |
|
|
— |
|
|
9,032 |
|
|
Other |
|
|
— |
|
|
3,943 |
|
|
3,262 |
|
|
— |
|
|
— |
|
|
7,205 |
|
|
Commodity derivative assets |
|
|
— |
|
|
39,823 |
|
|
— |
|
|
— |
|
|
— |
|
|
39,823 |
|
|
Other current assets |
|
|
2,746 |
|
|
311 |
|
|
8,324 |
|
|
— |
|
|
— |
|
|
11,381 |
|
|
Assets held for sale |
|
|
— |
|
|
— |
|
|
3,455 |
|
|
— |
|
|
— |
|
|
3,455 |
|
|
Intercompany receivable |
|
|
18,567 |
|
|
1,204,759 |
|
|
— |
|
|
— |
|
|
(1,223,326) |
|
|
— |
|
|
Total current assets |
|
|
24,567 |
|
|
1,249,617 |
|
|
50,829 |
|
|
20 |
|
|
(1,223,326) |
|
|
101,707 |
|
|
Assets held for sale, net |
|
|
— |
|
|
— |
|
|
64,200 |
|
|
— |
|
|
— |
|
|
64,200 |
|
|
Oil and gas properties, net, at cost under the successful efforts method |
|
|
— |
|
|
— |
|
|
1,545,991 |
|
|
— |
|
|
— |
|
|
1,545,991 |
|
|
Other property, plant and equipment, net |
|
|
— |
|
|
— |
|
|
2,239 |
|
|
573 |
|
|
— |
|
|
2,812 |
|
|
Commodity derivative assets |
|
|
— |
|
|
5,914 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,914 |
|
|
Other assets |
|
|
— |
|
|
4,467 |
|
|
928 |
|
|
— |
|
|
— |
|
|
5,395 |
|
|
Investment in subsidiaries |
|
|
432,964 |
|
|
394,331 |
|
|
— |
|
|
— |
|
|
(827,295) |
|
|
— |
|
|
Total assets |
|
$ |
457,531 |
|
$ |
1,654,329 |
|
$ |
1,664,187 |
|
$ |
593 |
|
$ |
(2,050,621) |
|
$ |
1,726,019 |
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
27 |
|
$ |
62 |
|
$ |
55,964 |
|
$ |
— |
|
$ |
— |
|
$ |
56,053 |
|
|
Oil and gas sales payable |
|
|
— |
|
|
— |
|
|
22,301 |
|
|
— |
|
|
— |
|
|
22,301 |
|
|
Accrued liabilities |
|
|
33 |
|
|
11,418 |
|
|
8,120 |
|
|
— |
|
|
— |
|
|
19,571 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
3,036 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,036 |
|
|
Other current liabilities |
|
|
639 |
|
|
1,985 |
|
|
5,475 |
|
|
— |
|
|
— |
|
|
8,099 |
|
|
Liabilities related to assets held for sale |
|
|
— |
|
|
— |
|
|
7,472 |
|
|
— |
|
|
— |
|
|
7,472 |
|
|
Intercompany payable |
|
|
— |
|
|
— |
|
|
1,220,390 |
|
|
2,936 |
|
|
(1,223,326) |
|
|
— |
|
|
Total current liabilities |
|
|
699 |
|
|
16,501 |
|
|
1,319,722 |
|
|
2,936 |
|
|
(1,223,326) |
|
|
116,532 |
|
|
Liabilities related to assets held for sale |
|
|
— |
|
|
— |
|
|
1,143 |
|
|
— |
|
|
— |
|
|
1,143 |
|
|
Long-term debt |
|
|
— |
|
|
728,163 |
|
|
— |
|
|
— |
|
|
— |
|
|
728,163 |
|
|
Deferred revenue |
|
|
— |
|
|
6,106 |
|
|
— |
|
|
— |
|
|
— |
|
|
6,106 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
123 |
|
|
— |
|
|
— |
|
|
— |
|
|
123 |
|
|
Asset retirement obligations |
|
|
— |
|
|
— |
|
|
19,061 |
|
|
— |
|
|
— |
|
|
19,061 |
|
|
Liability under tax receivable agreement |
|
|
11,807 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,807 |
|
|
Other liabilities |
|
|
— |
|
|
236 |
|
|
666 |
|
|
— |
|
|
— |
|
|
902 |
|
|
Deferred tax liabilities |
|
|
85 |
|
|
2,826 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,911 |
|
|
Total liabilities |
|
|
12,591 |
|
|
753,955 |
|
|
1,340,592 |
|
|
2,936 |
|
|
(1,223,326) |
|
|
886,748 |
|
|
Mezzanine equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.001 par value; 1,840,000 shares issued and outstanding at June 30, 2017 |
|
|
89,288 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
89,288 |
|
|
Stockholders’/ members' equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity |
|
|
— |
|
|
900,374 |
|
|
323,595 |
|
|
(2,343) |
|
|
(1,221,626) |
|
|
— |
|
|
Class A common stock, $0.001 par value; 66,671,659 shares issued and 66,649,057 shares outstanding at June 30, 2017 |
|
|
67 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
67 |
|
|
Class B common stock, $0.001 par value; 29,823,927 shares issued and outstanding at June 30, 2017 |
|
|
30 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
30 |
|
|
Treasury stock, at cost: 22,602 shares at June 30, 2017 |
|
|
(358) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(358) |
|
|
Additional paid-in-capital |
|
|
477,390 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
477,390 |
|
|
Retained earnings (deficit) |
|
|
(121,477) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(121,477) |
|
|
Stockholders' equity (deficit) |
|
|
355,652 |
|
|
900,374 |
|
|
323,595 |
|
|
(2,343) |
|
|
(1,221,626) |
|
|
355,652 |
|
|
Non-controlling interest |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
394,331 |
|
|
394,331 |
|
|
Total stockholders’ equity |
|
|
355,652 |
|
|
900,374 |
|
|
323,595 |
|
|
(2,343) |
|
|
(827,295) |
|
|
749,983 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
457,531 |
|
$ |
1,654,329 |
|
$ |
1,664,187 |
|
$ |
593 |
|
$ |
(2,050,621) |
|
$ |
1,726,019 |
|
Jones Energy, Inc.
Condensed Consolidating Balance Sheet
December 31, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
27,164 |
|
$ |
1,975 |
|
$ |
5,483 |
|
$ |
20 |
|
$ |
— |
|
$ |
34,642 |
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales |
|
|
— |
|
|
— |
|
|
26,568 |
|
|
— |
|
|
— |
|
|
26,568 |
|
|
Joint interest owners |
|
|
— |
|
|
— |
|
|
5,267 |
|
|
— |
|
|
— |
|
|
5,267 |
|
|
Other |
|
|
— |
|
|
5,434 |
|
|
627 |
|
|
— |
|
|
— |
|
|
6,061 |
|
|
Commodity derivative assets |
|
|
— |
|
|
24,100 |
|
|
— |
|
|
— |
|
|
— |
|
|
24,100 |
|
|
Other current assets |
|
|
— |
|
|
422 |
|
|
2,262 |
|
|
— |
|
|
— |
|
|
2,684 |
|
|
Intercompany receivable |
|
|
15,666 |
|
|
1,100,834 |
|
|
— |
|
|
— |
|
|
(1,116,500) |
|
|
— |
|
|
Total current assets |
|
|
42,830 |
|
|
1,132,765 |
|
|
40,207 |
|
|
20 |
|
|
(1,116,500) |
|
|
99,322 |
|
|
Oil and gas properties, net, at cost under the successful efforts method |
|
|
— |
|
|
— |
|
|
1,743,588 |
|
|
— |
|
|
— |
|
|
1,743,588 |
|
|
Other property, plant and equipment, net |
|
|
— |
|
|
— |
|
|
2,378 |
|
|
618 |
|
|
— |
|
|
2,996 |
|
|
Commodity derivative assets |
|
|
— |
|
|
34,744 |
|
|
— |
|
|
— |
|
|
— |
|
|
34,744 |
|
|
Other assets |
|
|
— |
|
|
5,265 |
|
|
785 |
|
|
— |
|
|
— |
|
|
6,050 |
|
|
Investment in subsidiaries |
|
|
531,363 |
|
|
453,237 |
|
|
— |
|
|
— |
|
|
(984,600) |
|
|
— |
|
|
Total assets |
|
$ |
574,193 |
|
$ |
1,626,011 |
|
$ |
1,786,958 |
|
$ |
638 |
|
$ |
(2,101,100) |
|
$ |
1,886,700 |
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
— |
|
$ |
13 |
|
$ |
36,514 |
|
$ |
— |
|
$ |
— |
|
$ |
36,527 |
|
|
Oil and gas sales payable |
|
|
— |
|
|
— |
|
|
28,339 |
|
|
— |
|
|
— |
|
|
28,339 |
|
|
Accrued liabilities |
|
|
3,874 |
|
|
11,227 |
|
|
10,597 |
|
|
9 |
|
|
— |
|
|
25,707 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
14,650 |
|
|
— |
|
|
— |
|
|
— |
|
|
14,650 |
|
|
Other current liabilities |
|
|
— |
|
|
1,984 |
|
|
600 |
|
|
— |
|
|
— |
|
|
2,584 |
|
|
Intercompany payable |
|
|
— |
|
|
— |
|
|
1,113,704 |
|
|
2,796 |
|
|
(1,116,500) |
|
|
— |
|
|
Total current liabilities |
|
|
3,874 |
|
|
27,874 |
|
|
1,189,754 |
|
|
2,805 |
|
|
(1,116,500) |
|
|
107,807 |
|
|
Long-term debt |
|
|
— |
|
|
724,009 |
|
|
— |
|
|
— |
|
|
— |
|
|
724,009 |
|
|
Deferred revenue |
|
|
— |
|
|
7,049 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,049 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
1,209 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,209 |
|
|
Asset retirement obligations |
|
|
— |
|
|
— |
|
|
19,458 |
|
|
— |
|
|
— |
|
|
19,458 |
|
|
Liability under tax receivable agreement |
|
|
43,045 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
43,045 |
|
|
Other liabilities |
|
|
— |
|
|
269 |
|
|
523 |
|
|
— |
|
|
— |
|
|
792 |
|
|
Deferred tax liabilities |
|
|
85 |
|
|
2,820 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,905 |
|
|
Total liabilities |
|
|
47,004 |
|
|
763,230 |
|
|
1,209,735 |
|
|
2,805 |
|
|
(1,116,500) |
|
|
906,274 |
|
|
Mezzanine equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.001 par value; 1,840,000 shares issued and outstanding at December 31, 2016 |
|
|
88,975 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
88,975 |
|
|
Stockholders’/ members' equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity |
|
|
— |
|
|
862,781 |
|
|
577,223 |
|
|
(2,167) |
|
|
(1,437,837) |
|
|
— |
|
|
Class A common stock, $0.001 par value; 57,048,076 shares issued and 57,025,474 shares outstanding at December 31, 2016 |
|
|
57 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
57 |
|
|
Class B common stock, $0.001 par value; 29,832,098 shares issued and outstanding at December 31, 2016 |
|
|
30 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
30 |
|
|
Treasury stock, at cost: 22,602 shares at December 31, 2016 |
|
|
(358) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(358) |
|
|
Additional paid-in-capital |
|
|
447,137 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
447,137 |
|
|
Retained earnings (deficit) |
|
|
(8,652) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8,652) |
|
|
Stockholders' equity (deficit) |
|
|
438,214 |
|
|
862,781 |
|
|
577,223 |
|
|
(2,167) |
|
|
(1,437,837) |
|
|
438,214 |
|
|
Non-controlling interest |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
453,237 |
|
|
453,237 |
|
|
Total stockholders’ equity |
|
|
438,214 |
|
|
862,781 |
|
|
577,223 |
|
|
(2,167) |
|
|
(984,600) |
|
|
891,451 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
574,193 |
|
$ |
1,626,011 |
|
$ |
1,786,958 |
|
$ |
638 |
|
$ |
(2,101,100) |
|
$ |
1,886,700 |
|
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
48,114 |
|
$ |
— |
|
$ |
— |
|
$ |
48,114 |
|
||||||
|
Other revenues |
|
|
— |
|
|
485 |
|
|
27 |
|
|
— |
|
|
— |
|
|
512 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
485 |
|
|
48,141 |
|
|
— |
|
|
— |
|
|
48,626 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
9,425 |
|
|
— |
|
|
— |
|
|
9,425 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
2,790 |
|
|
— |
|
|
— |
|
|
2,790 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
6,725 |
|
|
— |
|
|
— |
|
|
6,725 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
45,313 |
|
|
23 |
|
|
— |
|
|
45,336 |
|
||||||
|
Impairment of oil and gas properties |
|
|
— |
|
|
— |
|
|
161,886 |
|
|
— |
|
|
— |
|
|
161,886 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
266 |
|
|
— |
|
|
— |
|
|
266 |
|
||||||
|
General and administrative |
|
|
— |
|
|
2,920 |
|
|
5,626 |
|
|
87 |
|
|
— |
|
|
8,633 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
2,920 |
|
|
232,031 |
|
|
110 |
|
|
— |
|
|
235,061 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(2,435) |
|
|
(183,890) |
|
|
(110) |
|
|
— |
|
|
(186,435) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(12,941) |
|
|
264 |
|
|
— |
|
|
— |
|
|
(12,677) |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
21,527 |
|
|
— |
|
|
— |
|
|
— |
|
|
21,527 |
|
||||||
|
Other income (expense) |
|
|
29,913 |
|
|
(24) |
|
|
(55) |
|
|
— |
|
|
— |
|
|
29,834 |
|
||||||
|
Other income (expense), net |
|
|
29,913 |
|
|
8,562 |
|
|
209 |
|
|
— |
|
|
— |
|
|
38,684 |
|
||||||
|
Income (loss) before income tax |
|
|
29,913 |
|
|
6,127 |
|
|
(183,681) |
|
|
(110) |
|
|
— |
|
|
(147,751) |
|
||||||
|
Equity interest in income (loss) |
|
|
(121,557) |
|
|
(56,107) |
|
|
— |
|
|
— |
|
|
177,664 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(2,405) |
|
|
(14) |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,419) |
|
||||||
|
Net income (loss) |
|
|
(89,239) |
|
|
(49,966) |
|
|
(183,681) |
|
|
(110) |
|
|
177,664 |
|
|
(145,332) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(56,093) |
|
|
(56,093) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(89,239) |
|
$ |
(49,966) |
|
$ |
(183,681) |
|
$ |
(110) |
|
$ |
233,757 |
|
$ |
(89,239) |
|
||||||
|
Dividends and accretion on preferred stock |
|
|
(1,966) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,966) |
|
||||||
|
Net income (loss) attributable to common shareholders |
|
$ |
(91,205) |
|
$ |
(49,966) |
|
$ |
(183,681) |
|
$ |
(110) |
|
$ |
233,757 |
|
$ |
(91,205) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
88,791 |
|
$ |
— |
|
$ |
— |
|
$ |
88,791 |
|
||||||
|
Other revenues |
|
|
— |
|
|
942 |
|
|
126 |
|
|
— |
|
|
— |
|
|
1,068 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
942 |
|
|
88,917 |
|
|
— |
|
|
— |
|
|
89,859 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
18,231 |
|
|
— |
|
|
— |
|
|
18,231 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
1,884 |
|
|
— |
|
|
— |
|
|
1,884 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
9,669 |
|
|
— |
|
|
— |
|
|
9,669 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
80,945 |
|
|
45 |
|
|
— |
|
|
80,990 |
|
||||||
|
Impairment of oil and gas properties |
|
|
— |
|
|
— |
|
|
161,886 |
|
|
— |
|
|
— |
|
|
161,886 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
467 |
|
|
— |
|
|
— |
|
|
467 |
|
||||||
|
General and administrative |
|
|
— |
|
|
5,913 |
|
|
10,630 |
|
|
131 |
|
|
— |
|
|
16,674 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
5,913 |
|
|
283,712 |
|
|
176 |
|
|
— |
|
|
289,801 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(4,971) |
|
|
(194,795) |
|
|
(176) |
|
|
— |
|
|
(199,942) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(25,755) |
|
|
191 |
|
|
— |
|
|
— |
|
|
(25,564) |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
43,847 |
|
|
— |
|
|
— |
|
|
— |
|
|
43,847 |
|
||||||
|
Other income (expense) |
|
|
30,581 |
|
|
(48) |
|
|
(119) |
|
|
— |
|
|
— |
|
|
30,414 |
|
||||||
|
Other income (expense), net |
|
|
30,581 |
|
|
18,044 |
|
|
72 |
|
|
— |
|
|
— |
|
|
48,697 |
|
||||||
|
Income (loss) before income tax |
|
|
30,581 |
|
|
13,073 |
|
|
(194,723) |
|
|
(176) |
|
|
— |
|
|
(151,245) |
|
||||||
|
Equity interest in income (loss) |
|
|
(123,611) |
|
|
(58,215) |
|
|
— |
|
|
— |
|
|
181,826 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(2,404) |
|
|
6 |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,398) |
|
||||||
|
Net income (loss) |
|
|
(90,626) |
|
|
(45,148) |
|
|
(194,723) |
|
|
(176) |
|
|
181,826 |
|
|
(148,847) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(58,221) |
|
|
(58,221) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(90,626) |
|
$ |
(45,148) |
|
$ |
(194,723) |
|
$ |
(176) |
|
$ |
240,047 |
|
$ |
(90,626) |
|
||||||
|
Dividends and accretion on preferred stock |
|
|
(3,993) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,993) |
|
||||||
|
Net income (loss) attributable to common shareholders |
|
$ |
(94,619) |
|
$ |
(45,148) |
|
$ |
(194,723) |
|
$ |
(176) |
|
$ |
240,047 |
|
$ |
(94,619) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
28,398 |
|
$ |
— |
|
$ |
— |
|
$ |
28,398 |
|
||||||
|
Other revenues |
|
|
— |
|
|
596 |
|
|
150 |
|
|
— |
|
|
— |
|
|
746 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
596 |
|
|
28,548 |
|
|
— |
|
|
— |
|
|
29,144 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
7,545 |
|
|
— |
|
|
— |
|
|
7,545 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
1,727 |
|
|
— |
|
|
— |
|
|
1,727 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
77 |
|
|
— |
|
|
— |
|
|
77 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
38,118 |
|
|
19 |
|
|
— |
|
|
38,137 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
297 |
|
|
— |
|
|
— |
|
|
297 |
|
||||||
|
General and administrative |
|
|
— |
|
|
3,293 |
|
|
4,806 |
|
|
27 |
|
|
— |
|
|
8,126 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
3,293 |
|
|
52,570 |
|
|
46 |
|
|
— |
|
|
55,909 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(2,697) |
|
|
(24,022) |
|
|
(46) |
|
|
— |
|
|
(26,765) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(12,727) |
|
|
(80) |
|
|
— |
|
|
— |
|
|
(12,807) |
|
||||||
|
Gain on debt extinguishment |
|
|
— |
|
|
8,878 |
|
|
— |
|
|
— |
|
|
— |
|
|
8,878 |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
(40,002) |
|
|
— |
|
|
— |
|
|
— |
|
|
(40,002) |
|
||||||
|
Other income (expense) |
|
|
(267) |
|
|
(73) |
|
|
2 |
|
|
— |
|
|
— |
|
|
(338) |
|
||||||
|
Other income (expense), net |
|
|
(267) |
|
|
(43,924) |
|
|
(78) |
|
|
— |
|
|
— |
|
|
(44,269) |
|
||||||
|
Income (loss) before income tax |
|
|
(267) |
|
|
(46,621) |
|
|
(24,100) |
|
|
(46) |
|
|
— |
|
|
(71,034) |
|
||||||
|
Equity interest in income (loss) |
|
|
(35,100) |
|
|
(35,667) |
|
|
— |
|
|
— |
|
|
70,767 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(12,122) |
|
|
(266) |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,388) |
|
||||||
|
Net income (loss) |
|
|
(23,245) |
|
|
(82,022) |
|
|
(24,100) |
|
|
(46) |
|
|
70,767 |
|
|
(58,646) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(35,401) |
|
|
(35,401) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(23,245) |
|
$ |
(82,022) |
|
$ |
(24,100) |
|
$ |
(46) |
|
$ |
106,168 |
|
$ |
(23,245) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
53,478 |
|
$ |
— |
|
$ |
— |
|
$ |
53,478 |
|
||||||
|
Other revenues |
|
|
— |
|
|
1,241 |
|
|
283 |
|
|
— |
|
|
— |
|
|
1,524 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
1,241 |
|
|
53,761 |
|
|
— |
|
|
— |
|
|
55,002 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
16,162 |
|
|
— |
|
|
— |
|
|
16,162 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
3,328 |
|
|
— |
|
|
— |
|
|
3,328 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
239 |
|
|
— |
|
|
— |
|
|
239 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
79,857 |
|
|
42 |
|
|
— |
|
|
79,899 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
590 |
|
|
— |
|
|
— |
|
|
590 |
|
||||||
|
General and administrative |
|
|
— |
|
|
6,171 |
|
|
9,407 |
|
|
52 |
|
|
— |
|
|
15,630 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
6,171 |
|
|
109,583 |
|
|
94 |
|
|
— |
|
|
115,848 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(4,930) |
|
|
(55,822) |
|
|
(94) |
|
|
— |
|
|
(60,846) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(27,766) |
|
|
161 |
|
|
— |
|
|
— |
|
|
(27,605) |
|
||||||
|
Gain on debt extinguishment |
|
|
— |
|
|
99,530 |
|
|
— |
|
|
— |
|
|
— |
|
|
99,530 |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
(22,783) |
|
|
— |
|
|
— |
|
|
— |
|
|
(22,783) |
|
||||||
|
Other income (expense) |
|
|
162 |
|
|
(274) |
|
|
(1) |
|
|
— |
|
|
— |
|
|
(113) |
|
||||||
|
Other income (expense), net |
|
|
162 |
|
|
48,707 |
|
|
160 |
|
|
— |
|
|
— |
|
|
49,029 |
|
||||||
|
Income (loss) before income tax |
|
|
162 |
|
|
43,777 |
|
|
(55,662) |
|
|
(94) |
|
|
— |
|
|
(11,817) |
|
||||||
|
Equity interest in income (loss) |
|
|
(6,132) |
|
|
(5,847) |
|
|
— |
|
|
— |
|
|
11,979 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(1,636) |
|
|
(49) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,685) |
|
||||||
|
Net income (loss) |
|
|
(4,334) |
|
|
37,979 |
|
|
(55,662) |
|
|
(94) |
|
|
11,979 |
|
|
(10,132) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,798) |
|
|
(5,798) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(4,334) |
|
$ |
37,979 |
|
$ |
(55,662) |
|
$ |
(94) |
|
$ |
17,777 |
|
$ |
(4,334) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(90,626) |
|
$ |
(45,148) |
|
$ |
(194,723) |
|
$ |
(176) |
|
$ |
181,826 |
|
$ |
(148,847) |
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
|
|
60,656 |
|
|
(2,685) |
|
|
294,004 |
|
|
176 |
|
|
(181,826) |
|
|
170,325 |
|
|
Net cash (used in) / provided by operations |
|
|
(29,970) |
|
|
(47,833) |
|
|
99,281 |
|
|
— |
|
|
— |
|
|
21,478 |
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas properties |
|
|
— |
|
|
— |
|
|
(107,250) |
|
|
— |
|
|
— |
|
|
(107,250) |
|
|
Net adjustments to purchase price of properties acquired |
|
|
— |
|
|
— |
|
|
2,391 |
|
|
— |
|
|
— |
|
|
2,391 |
|
|
Proceeds from sales of assets |
|
|
— |
|
|
— |
|
|
2,730 |
|
|
— |
|
|
— |
|
|
2,730 |
|
|
Acquisition of other property, plant and equipment |
|
|
— |
|
|
— |
|
|
(436) |
|
|
— |
|
|
— |
|
|
(436) |
|
|
Current period settlements of matured derivative contracts |
|
|
— |
|
|
45,738 |
|
|
— |
|
|
— |
|
|
— |
|
|
45,738 |
|
|
Net cash (used in) / provided by investing |
|
|
— |
|
|
45,738 |
|
|
(102,565) |
|
|
— |
|
|
— |
|
|
(56,827) |
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
75,000 |
|
|
Repayment of long-term debt |
|
|
— |
|
|
(72,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
(72,000) |
|
|
Payment of cash dividends on preferred stock |
|
|
(3,367) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,367) |
|
|
Net distributions paid to JEH unitholders |
|
|
1,075 |
|
|
(1,637) |
|
|
— |
|
|
— |
|
|
— |
|
|
(562) |
|
|
Net payments for share based compensation |
|
|
— |
|
|
(462) |
|
|
— |
|
|
— |
|
|
— |
|
|
(462) |
|
|
Proceeds from sale of common stock |
|
|
8,352 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,352 |
|
|
Net cash (used in) / provided by financing |
|
|
6,060 |
|
|
901 |
|
|
— |
|
|
— |
|
|
— |
|
|
6,961 |
|
|
Net increase (decrease) in cash |
|
|
(23,910) |
|
|
(1,194) |
|
|
(3,284) |
|
|
— |
|
|
— |
|
|
(28,388) |
|
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
27,164 |
|
|
1,975 |
|
|
5,483 |
|
|
20 |
|
|
— |
|
|
34,642 |
|
|
End of period |
|
$ |
3,254 |
|
$ |
781 |
|
$ |
2,199 |
|
$ |
20 |
|
$ |
— |
|
$ |
6,254 |
|
Jones Energy, Inc.
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(4,334) |
|
$ |
37,979 |
|
$ |
(55,662) |
|
$ |
(94) |
|
$ |
11,979 |
|
$ |
(10,132) |
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
|
|
3,278 |
|
|
(86,767) |
|
|
111,506 |
|
|
94 |
|
|
(11,979) |
|
|
16,132 |
|
|
Net cash (used in) / provided by operations |
|
|
(1,056) |
|
|
(48,788) |
|
|
55,844 |
|
|
— |
|
|
— |
|
|
6,000 |
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas properties |
|
|
— |
|
|
— |
|
|
(27,592) |
|
|
— |
|
|
— |
|
|
(27,592) |
|
|
Proceeds from sales of assets |
|
|
— |
|
|
— |
|
|
5 |
|
|
— |
|
|
— |
|
|
5 |
|
|
Acquisition of other property, plant and equipment |
|
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
— |
|
|
12 |
|
|
Current period settlements of matured derivative contracts |
|
|
— |
|
|
77,622 |
|
|
— |
|
|
— |
|
|
— |
|
|
77,622 |
|
|
Net cash (used in) / provided by investing |
|
|
— |
|
|
77,622 |
|
|
(27,575) |
|
|
— |
|
|
— |
|
|
50,047 |
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
75,000 |
|
|
Purchase of senior notes |
|
|
— |
|
|
(84,589) |
|
|
— |
|
|
— |
|
|
— |
|
|
(84,589) |
|
|
Net distributions paid to JEH unitholders |
|
|
9,910 |
|
|
(20,019) |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,109) |
|
|
Proceeds from sale of common stock |
|
|
1,056 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,056 |
|
|
Net cash (used in) / provided by financing |
|
|
10,966 |
|
|
(29,608) |
|
|
— |
|
|
— |
|
|
— |
|
|
(18,642) |
|
|
Net increase (decrease) in cash |
|
|
9,910 |
|
|
(774) |
|
|
28,269 |
|
|
— |
|
|
— |
|
|
37,405 |
|
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Beginning of period |
|
|
100 |
|
|
12,448 |
|
|
9,325 |
|
|
20 |
|
|
— |
|
|
21,893 |
|
|
End of period |
|
$ |
10,010 |
|
$ |
11,674 |
|
$ |
37,594 |
|
$ |
20 |
|
$ |
— |
|
$ |
59,298 |
|
|
|||
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the Securities and Exchange Commission. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s financial position as of December 31, 2016 and the financial statements reported for June 30, 2017 and 2016 and each of the six-month periods then ended include the Company and all of its subsidiaries.
Certain prior period amounts have been reclassified to conform to the current presentation.
The accompanying unaudited condensed consolidated financial statements for the periods ending June 30, 2017 and 2016 have been prepared in accordance with GAAP for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been appropriately condensed or omitted in this Quarterly Report. The Company believes the disclosures made are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements contained in this report include all normal and recurring material adjustments that, in the opinion of management, are necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented herein. It is recommended that these unaudited condensed consolidated financial statements should be read in conjunction with our most recent audited consolidated financial statements included in Jones Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016.
Use of Estimates
There have been no significant changes in our use of estimates since those reported in Jones Energy, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2016.
Production taxes
During the first quarter of 2017, the Company's application for High-Cost Gas Incentive refunds in Texas was approved for qualified wells on which taxes were initially paid between October 2012 and September 2016. The Company received a net production tax refund of $3.3 million, which was recorded as a reduction in Production and ad valorem taxes on the Company’s Consolidated Statement of Operations. No further refunds were received during the three months ended June 30, 2017.
|
|||
|
|
|
June 30, |
|
|
|
(in thousands of dollars) |
|
2017 |
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
Oil and gas sales |
|
$ |
3,250 |
|
|
Joint interest owners |
|
|
102 |
|
|
Other |
|
|
14 |
|
|
|
|
|
|
|
|
Other current assets |
|
|
4 |
|
|
|
|
|
|
|
|
Leasehold improvements |
|
|
27 |
|
|
Other |
|
|
68 |
|
|
Less: Accumulated depreciation and amortization |
|
|
(10) |
|
|
Other property, plant and equipment, net |
|
|
85 |
|
|
|
|
|
|
|
|
Total current assets held for sale |
|
|
3,455 |
|
|
|
|
|
|
|
|
Mineral interests in properties |
|
|
|
|
|
Unproved |
|
|
12,204 |
|
|
Proved |
|
|
216,570 |
|
|
Wells and equipment and related facilities |
|
|
179,925 |
|
|
Less: Accumulated depletion and impairment |
|
|
(344,499) |
|
|
Oil and gas properties, net |
|
|
64,200 |
|
|
|
|
|
|
|
|
Total assets held for sale, net |
|
$ |
67,655 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
379 |
|
|
Oil and gas sales payable, |
|
|
6,015 |
|
|
Accrued liabilities |
|
|
1,078 |
|
|
|
|
|
|
|
|
Total current liabilities related to assets held for sale |
|
|
7,472 |
|
|
|
|
|
|
|
|
Asset retirement obligations |
|
|
1,143 |
|
|
|
|
|
|
|
|
Total liabilities related to assets held for sale |
|
$ |
8,615 |
|
|
|||
|
|
|
June 30, |
|
December 31, |
|
||
|
(in thousands of dollars) |
|
2017 |
|
2016 |
|
||
|
Mineral interests in properties |
|
|
|
|
|
|
|
|
Unproved |
|
$ |
180,018 |
|
$ |
213,153 |
|
|
Proved |
|
|
879,149 |
|
|
1,054,683 |
|
|
Wells and equipment and related facilities |
|
|
1,311,087 |
|
|
1,395,291 |
|
|
|
|
|
2,370,254 |
|
|
2,663,127 |
|
|
Less: Accumulated depletion and impairment |
|
|
(824,263) |
|
|
(919,539) |
|
|
Net oil and gas properties |
|
$ |
1,545,991 |
|
$ |
1,743,588 |
|
|
|
|
June 30, |
|
December 31, |
|
||
|
(in thousands of dollars) |
|
2017 |
|
2016 |
|
||
|
Leasehold improvements |
|
$ |
1,186 |
|
$ |
1,213 |
|
|
Furniture, fixtures, computers and software |
|
|
4,378 |
|
|
4,170 |
|
|
Vehicles |
|
|
1,768 |
|
|
1,677 |
|
|
Aircraft |
|
|
910 |
|
|
910 |
|
|
Other |
|
|
215 |
|
|
284 |
|
|
|
|
|
8,457 |
|
|
8,254 |
|
|
Less: Accumulated depreciation and amortization |
|
|
(5,645) |
|
|
(5,258) |
|
|
Net other property, plant and equipment |
|
$ |
2,812 |
|
$ |
2,996 |
|
|
|||
|
(in thousands of dollars) |
|
June 30, 2017 |
|
December 31, 2016 |
|
||
|
Revolver |
|
$ |
181,000 |
|
$ |
178,000 |
|
|
2022 Notes |
|
|
409,148 |
|
|
409,148 |
|
|
2023 Notes |
|
|
150,000 |
|
|
150,000 |
|
|
Total principal amount |
|
|
740,148 |
|
|
737,148 |
|
|
Less: unamortized discount |
|
|
(5,735) |
|
|
(6,240) |
|
|
Less: debt issuance costs, net |
|
|
(6,250) |
|
|
(6,899) |
|
|
Total carrying amount |
|
$ |
728,163 |
|
$ |
724,009 |
|
|
|||
|
|
|
June 30, 2017 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
Final |
|
|
|
|
|
|
|
Low |
|
High |
|
Average |
|
Expiration |
|
|||
|
Oil swaps |
|
Exercise price |
|
$ |
44.60 |
|
$ |
85.60 |
|
$ |
56.75 |
|
December 2020 |
|
|
|
|
Offset exercise price |
|
$ |
42.00 |
|
$ |
47.65 |
|
$ |
46.43 |
|
|
|
|
|
|
Net barrels per month |
|
|
20,000 |
|
|
181,000 |
|
|
76,762 |
|
|
|
|
Natural gas swaps |
|
Exercise price |
|
$ |
2.76 |
|
$ |
4.57 |
|
$ |
3.18 |
|
December 2020 |
|
|
|
|
Offset exercise price |
|
$ |
2.80 |
|
$ |
2.92 |
|
$ |
2.81 |
|
|
|
|
|
|
Net mmbtu per month |
|
|
300,000 |
|
|
1,890,000 |
|
|
1,093,095 |
|
|
|
|
Natural gas liquids swaps |
|
Exercise price |
|
$ |
18.06 |
|
$ |
72.52 |
|
$ |
28.61 |
|
December 2018 |
|
|
|
|
Barrels per month |
|
|
130,000 |
|
|
145,000 |
|
|
140,000 |
|
|
|
|
Oil collars |
|
Puts (floors) |
|
$ |
45.00 |
|
$ |
50.00 |
|
$ |
48.52 |
|
September 2019 |
|
|
|
|
Calls (ceilings) |
|
$ |
56.60 |
|
$ |
61.00 |
|
$ |
59.64 |
|
|
|
|
|
|
Net barrels per month |
|
|
65,000 |
|
|
73,000 |
|
|
67,500 |
|
|
|
|
Natural gas collars |
|
Puts (floors) |
|
$ |
2.55 |
|
$ |
2.55 |
|
$ |
2.55 |
|
December 2019 |
|
|
|
|
Calls (ceilings) |
|
$ |
3.08 |
|
$ |
3.41 |
|
$ |
3.19 |
|
|
|
|
|
|
Net barrels per month |
|
|
950,000 |
|
|
1,050,000 |
|
|
990,833 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Amounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
of Assets / |
|
Gross Amounts |
|
|
|
|
|||
|
|
|
Gross Amounts |
|
Amounts |
|
Liabilities |
|
Not |
|
|
|
|
||||
|
|
|
of Recognized |
|
Offset in the |
|
Presented in |
|
Offset in the |
|
|
|
|
||||
|
|
|
Assets / |
|
Balance |
|
the Balance |
|
Balance |
|
|
|
|
||||
|
(in thousands of dollars) |
|
Liabilities |
|
Sheet |
|
Sheet |
|
Sheet |
|
Net Amount |
|
|||||
|
June 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
58,023 |
|
$ |
(12,286) |
|
$ |
45,737 |
|
$ |
— |
|
$ |
45,737 |
|
|
Liabilities |
|
|
(15,445) |
|
|
12,286 |
|
|
(3,159) |
|
|
— |
|
|
(3,159) |
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
$ |
79,649 |
|
$ |
(20,805) |
|
$ |
58,844 |
|
$ |
— |
|
$ |
58,844 |
|
|
Liabilities |
|
|
(36,664) |
|
|
20,805 |
|
|
(15,859) |
|
|
— |
|
|
(15,859) |
|
|
|||
|
(in thousands of dollars) |
|
June 30, 2017 |
|
||||||||||
|
|
|
Fair Value Measurements Using |
|
||||||||||
|
Commodity Price Hedges |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Current assets |
|
$ |
— |
|
$ |
39,823 |
|
$ |
— |
|
$ |
39,823 |
|
|
Long-term assets |
|
|
— |
|
|
3,567 |
|
|
2,347 |
|
|
5,914 |
|
|
Current liabilities |
|
|
— |
|
|
2,702 |
|
|
334 |
|
|
3,036 |
|
|
Long-term liabilities (1) |
|
|
— |
|
|
(137) |
|
|
260 |
|
|
123 |
|
|
(in thousands of dollars) |
|
December 31, 2016 |
|
||||||||||
|
|
|
Fair Value Measurements Using |
|
||||||||||
|
Commodity Price Hedges |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Current assets |
|
$ |
— |
|
$ |
24,100 |
|
$ |
— |
|
$ |
24,100 |
|
|
Long-term assets (2) |
|
|
— |
|
|
36,384 |
|
|
(1,640) |
|
|
34,744 |
|
|
Current liabilities |
|
|
— |
|
|
13,636 |
|
|
1,014 |
|
|
14,650 |
|
|
Long-term liabilities |
|
|
— |
|
|
892 |
|
|
317 |
|
|
1,209 |
|
|
(1) |
Level 2 long-term liabilities are negative as a result of the netting of our commodity derivatives reflected on our Consolidated Balance Sheet as of June 30, 2017. Our agreements include set-off provisions, as noted in Note 6, “Derivative Instruments and Hedging Activities - Offsetting Assets and Liabilities”. |
|
(2) |
Level 3 long-term assets are negative as a result of the netting of our commodity derivatives reflected on our Consolidated Balance Sheet as of December 31, 2016. Our agreements include set-off provisions, as noted in Note 6, “Derivative Instruments and Hedging Activities - Offsetting Assets and Liabilities”. |
|
|
|
Quantitative Information About Level 3 Fair Value Measurements |
|
|||||||
|
|
|
Fair Value |
|
|
|
Unobservable |
|
|
|
|
|
Commodity Price Hedges |
|
(000’s) |
|
Valuation Technique |
|
Input |
|
Range |
|
|
|
Natural gas liquid swaps |
|
$ |
(252) |
|
Use a discounted cash flow approach using inputs including forward price statements from counterparties |
|
Natural gas liquid futures |
|
$22.89 - $23.94 per barrel |
|
|
Crude oil collars |
|
$ |
2,766 |
|
Use a discounted option model approach using inputs including interpolated volatilities for certain settlement months where market volatility quotes were unavailable for the option strike price |
|
Market volatility quotes at the option strike for certain settlement months in 2019 |
|
$45.00 - $61.00 per barrel |
|
|
Natural gas collars |
|
$ |
(761) |
|
Use a discounted option model approach using inputs including interpolated volatilities for certain settlement months where market volatility quotes were unavailable for the option strike price |
|
Market volatility quotes at the option strike for certain settlement months in 2019 |
|
$2.55 - $3.41 per barrel |
|
|
(in thousands of dollars) |
|
|
|
|
|
Balance at December 31, 2016, net |
|
$ |
(2,971) |
|
|
Purchases |
|
|
131 |
|
|
Settlements |
|
|
716 |
|
|
Transfers to Level 2 |
|
|
— |
|
|
Transfers to Level 3 |
|
|
— |
|
|
Changes in fair value |
|
|
3,877 |
|
|
Balance at June 30, 2017, net |
|
$ |
1,753 |
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
||||||||
|
|
|
Principal |
|
|
|
|
Principal |
|
|
|
|
||
|
(in thousands of dollars) |
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
|
||||
|
Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolver |
|
$ |
181,000 |
|
$ |
181,000 |
|
$ |
178,000 |
|
$ |
178,000 |
|
|
2022 Notes |
|
|
409,148 |
|
|
289,206 |
|
|
409,148 |
|
|
393,150 |
|
|
2023 Notes |
|
|
150,000 |
|
|
111,590 |
|
|
150,000 |
|
|
153,375 |
|
|
|||
|
(in thousands of dollars) |
|
|
|
|
|
Balance at December 31, 2016 |
|
$ |
20,058 |
|
|
Liabilities incurred |
|
|
563 |
|
|
Accretion of ARO liability |
|
|
467 |
|
|
Liabilities settled due to sale of related properties |
|
|
(60) |
|
|
Liabilities settled due to plugging and abandonment |
|
|
(56) |
|
|
Liabilities related to assets held for sale |
|
|
(1,143) |
|
|
Change in estimate |
|
|
(168) |
|
|
Total ARO balance at June 30, 2017 |
|
|
19,661 |
|
|
Less: Current portion of ARO |
|
|
(600) |
|
|
Total long-term ARO at June 30, 2017 |
|
$ |
19,061 |
|
|
|||
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Grant Date Fair Value |
|
|
|
|
|
JEH Units |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
90,762 |
|
$ |
15.00 |
|
|
Granted |
|
— |
|
|
15.00 |
|
|
Forfeited |
|
— |
|
|
15.00 |
|
|
Vested |
|
(43,377) |
|
|
15.00 |
|
|
Unvested at June 30, 2017 |
|
47,385 |
|
$ |
15.00 |
|
|
|
|
Restricted |
|
Weighted Average |
|
|
|
|
|
Stock Unit |
|
Grant Date Fair Value |
|
|
|
|
|
Awards |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
1,359,142 |
|
$ |
5.60 |
|
|
Adjustment (1) |
|
6,830 |
|
|
— |
|
|
Granted |
|
2,333,368 |
|
|
2.34 |
|
|
Forfeited |
|
(163,211) |
|
|
3.23 |
|
|
Vested |
|
(577,729) |
|
|
6.68 |
|
|
Unvested at June 30, 2017 |
|
2,958,400 |
|
$ |
2.93 |
|
|
|
|
2017 |
|
|
|
|
Performance |
|
|
|
|
Share |
|
|
|
|
Unit Awards |
|
|
Forecast period (years) |
|
2.71 |
|
|
Risk-free interest rate |
|
1.34 |
% |
|
Jones stock price volatility |
|
78.93 |
% |
|
|
|
Performance |
|
Weighted Average |
|
|
|
|
|
Share Unit |
|
Grant Date Fair Value |
|
|
|
|
|
Awards |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
942,073 |
|
$ |
6.25 |
|
|
Adjustment (1) |
|
4,067 |
|
|
— |
|
|
Granted |
|
519,562 |
|
|
2.24 |
|
|
Forfeited |
|
(23,552) |
|
|
9.42 |
|
|
Vested |
|
— |
|
|
— |
|
|
Unvested at June 30, 2017 |
|
1,442,150 |
|
$ |
4.74 |
|
|
|
|
2017 |
|
|
|
|
Performance |
|
|
|
|
Unit Awards |
|
|
Forecast period (years) |
|
2.71 |
|
|
Risk-free interest rate |
|
1.34 |
% |
|
Jones stock price volatility |
|
78.93 |
% |
|
|
|
|
|
Weighted Average |
|
|
|
|
|
Restricted |
|
Grant Date Fair Value |
|
|
|
|
|
Stock Awards |
|
per Share |
|
|
|
Unvested at December 31, 2016 |
|
152,050 |
|
$ |
3.68 |
|
|
Granted |
|
180,000 |
|
|
2.25 |
|
|
Forfeited |
|
— |
|
|
— |
|
|
Vested |
|
(152,050) |
|
|
3.68 |
|
|
Unvested at June 30, 2017 |
|
180,000 |
|
$ |
2.25 |
|
|
|||
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
(in thousands of dollars) |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
||||
|
Jones Energy, Inc. |
|
$ |
(2,414) |
|
$ |
(12,215) |
|
$ |
(2,400) |
|
$ |
(1,646) |
|
|
Non-controlling interest |
|
|
(5) |
|
|
(173) |
|
|
2 |
|
|
(39) |
|
|
Income tax provision (benefit) |
|
$ |
(2,419) |
|
$ |
(12,388) |
|
$ |
(2,398) |
|
$ |
(1,685) |
|
|
|||
|
(in thousands of dollars) |
|
|
|
|
|
Mezzanine equity at December 31, 2016 |
|
$ |
88,975 |
|
|
Dividends on preferred stock, net |
|
|
— |
|
|
Accretion on preferred stock |
|
|
313 |
|
|
Mezzanine equity at June 30, 2017 |
|
$ |
89,288 |
|
|
|||
Jones Energy, Inc.
Condensed Consolidating Balance Sheet
June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
3,254 |
|
$ |
781 |
|
$ |
2,199 |
|
$ |
20 |
|
$ |
— |
|
$ |
6,254 |
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales |
|
|
— |
|
|
— |
|
|
24,557 |
|
|
— |
|
|
— |
|
|
24,557 |
|
|
Joint interest owners |
|
|
— |
|
|
— |
|
|
9,032 |
|
|
— |
|
|
— |
|
|
9,032 |
|
|
Other |
|
|
— |
|
|
3,943 |
|
|
3,262 |
|
|
— |
|
|
— |
|
|
7,205 |
|
|
Commodity derivative assets |
|
|
— |
|
|
39,823 |
|
|
— |
|
|
— |
|
|
— |
|
|
39,823 |
|
|
Other current assets |
|
|
2,746 |
|
|
311 |
|
|
8,324 |
|
|
— |
|
|
— |
|
|
11,381 |
|
|
Assets held for sale |
|
|
— |
|
|
— |
|
|
3,455 |
|
|
— |
|
|
— |
|
|
3,455 |
|
|
Intercompany receivable |
|
|
18,567 |
|
|
1,204,759 |
|
|
— |
|
|
— |
|
|
(1,223,326) |
|
|
— |
|
|
Total current assets |
|
|
24,567 |
|
|
1,249,617 |
|
|
50,829 |
|
|
20 |
|
|
(1,223,326) |
|
|
101,707 |
|
|
Assets held for sale, net |
|
|
— |
|
|
— |
|
|
64,200 |
|
|
— |
|
|
— |
|
|
64,200 |
|
|
Oil and gas properties, net, at cost under the successful efforts method |
|
|
— |
|
|
— |
|
|
1,545,991 |
|
|
— |
|
|
— |
|
|
1,545,991 |
|
|
Other property, plant and equipment, net |
|
|
— |
|
|
— |
|
|
2,239 |
|
|
573 |
|
|
— |
|
|
2,812 |
|
|
Commodity derivative assets |
|
|
— |
|
|
5,914 |
|
|
— |
|
|
— |
|
|
— |
|
|
5,914 |
|
|
Other assets |
|
|
— |
|
|
4,467 |
|
|
928 |
|
|
— |
|
|
— |
|
|
5,395 |
|
|
Investment in subsidiaries |
|
|
432,964 |
|
|
394,331 |
|
|
— |
|
|
— |
|
|
(827,295) |
|
|
— |
|
|
Total assets |
|
$ |
457,531 |
|
$ |
1,654,329 |
|
$ |
1,664,187 |
|
$ |
593 |
|
$ |
(2,050,621) |
|
$ |
1,726,019 |
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
27 |
|
$ |
62 |
|
$ |
55,964 |
|
$ |
— |
|
$ |
— |
|
$ |
56,053 |
|
|
Oil and gas sales payable |
|
|
— |
|
|
— |
|
|
22,301 |
|
|
— |
|
|
— |
|
|
22,301 |
|
|
Accrued liabilities |
|
|
33 |
|
|
11,418 |
|
|
8,120 |
|
|
— |
|
|
— |
|
|
19,571 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
3,036 |
|
|
— |
|
|
— |
|
|
— |
|
|
3,036 |
|
|
Other current liabilities |
|
|
639 |
|
|
1,985 |
|
|
5,475 |
|
|
— |
|
|
— |
|
|
8,099 |
|
|
Liabilities related to assets held for sale |
|
|
— |
|
|
— |
|
|
7,472 |
|
|
— |
|
|
— |
|
|
7,472 |
|
|
Intercompany payable |
|
|
— |
|
|
— |
|
|
1,220,390 |
|
|
2,936 |
|
|
(1,223,326) |
|
|
— |
|
|
Total current liabilities |
|
|
699 |
|
|
16,501 |
|
|
1,319,722 |
|
|
2,936 |
|
|
(1,223,326) |
|
|
116,532 |
|
|
Liabilities related to assets held for sale |
|
|
— |
|
|
— |
|
|
1,143 |
|
|
— |
|
|
— |
|
|
1,143 |
|
|
Long-term debt |
|
|
— |
|
|
728,163 |
|
|
— |
|
|
— |
|
|
— |
|
|
728,163 |
|
|
Deferred revenue |
|
|
— |
|
|
6,106 |
|
|
— |
|
|
— |
|
|
— |
|
|
6,106 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
123 |
|
|
— |
|
|
— |
|
|
— |
|
|
123 |
|
|
Asset retirement obligations |
|
|
— |
|
|
— |
|
|
19,061 |
|
|
— |
|
|
— |
|
|
19,061 |
|
|
Liability under tax receivable agreement |
|
|
11,807 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,807 |
|
|
Other liabilities |
|
|
— |
|
|
236 |
|
|
666 |
|
|
— |
|
|
— |
|
|
902 |
|
|
Deferred tax liabilities |
|
|
85 |
|
|
2,826 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,911 |
|
|
Total liabilities |
|
|
12,591 |
|
|
753,955 |
|
|
1,340,592 |
|
|
2,936 |
|
|
(1,223,326) |
|
|
886,748 |
|
|
Mezzanine equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.001 par value; 1,840,000 shares issued and outstanding at June 30, 2017 |
|
|
89,288 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
89,288 |
|
|
Stockholders’/ members' equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity |
|
|
— |
|
|
900,374 |
|
|
323,595 |
|
|
(2,343) |
|
|
(1,221,626) |
|
|
— |
|
|
Class A common stock, $0.001 par value; 66,671,659 shares issued and 66,649,057 shares outstanding at June 30, 2017 |
|
|
67 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
67 |
|
|
Class B common stock, $0.001 par value; 29,823,927 shares issued and outstanding at June 30, 2017 |
|
|
30 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
30 |
|
|
Treasury stock, at cost: 22,602 shares at June 30, 2017 |
|
|
(358) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(358) |
|
|
Additional paid-in-capital |
|
|
477,390 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
477,390 |
|
|
Retained earnings (deficit) |
|
|
(121,477) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(121,477) |
|
|
Stockholders' equity (deficit) |
|
|
355,652 |
|
|
900,374 |
|
|
323,595 |
|
|
(2,343) |
|
|
(1,221,626) |
|
|
355,652 |
|
|
Non-controlling interest |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
394,331 |
|
|
394,331 |
|
|
Total stockholders’ equity |
|
|
355,652 |
|
|
900,374 |
|
|
323,595 |
|
|
(2,343) |
|
|
(827,295) |
|
|
749,983 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
457,531 |
|
$ |
1,654,329 |
|
$ |
1,664,187 |
|
$ |
593 |
|
$ |
(2,050,621) |
|
$ |
1,726,019 |
|
Jones Energy, Inc.
Condensed Consolidating Balance Sheet
December 31, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
27,164 |
|
$ |
1,975 |
|
$ |
5,483 |
|
$ |
20 |
|
$ |
— |
|
$ |
34,642 |
|
|
Accounts receivable, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales |
|
|
— |
|
|
— |
|
|
26,568 |
|
|
— |
|
|
— |
|
|
26,568 |
|
|
Joint interest owners |
|
|
— |
|
|
— |
|
|
5,267 |
|
|
— |
|
|
— |
|
|
5,267 |
|
|
Other |
|
|
— |
|
|
5,434 |
|
|
627 |
|
|
— |
|
|
— |
|
|
6,061 |
|
|
Commodity derivative assets |
|
|
— |
|
|
24,100 |
|
|
— |
|
|
— |
|
|
— |
|
|
24,100 |
|
|
Other current assets |
|
|
— |
|
|
422 |
|
|
2,262 |
|
|
— |
|
|
— |
|
|
2,684 |
|
|
Intercompany receivable |
|
|
15,666 |
|
|
1,100,834 |
|
|
— |
|
|
— |
|
|
(1,116,500) |
|
|
— |
|
|
Total current assets |
|
|
42,830 |
|
|
1,132,765 |
|
|
40,207 |
|
|
20 |
|
|
(1,116,500) |
|
|
99,322 |
|
|
Oil and gas properties, net, at cost under the successful efforts method |
|
|
— |
|
|
— |
|
|
1,743,588 |
|
|
— |
|
|
— |
|
|
1,743,588 |
|
|
Other property, plant and equipment, net |
|
|
— |
|
|
— |
|
|
2,378 |
|
|
618 |
|
|
— |
|
|
2,996 |
|
|
Commodity derivative assets |
|
|
— |
|
|
34,744 |
|
|
— |
|
|
— |
|
|
— |
|
|
34,744 |
|
|
Other assets |
|
|
— |
|
|
5,265 |
|
|
785 |
|
|
— |
|
|
— |
|
|
6,050 |
|
|
Investment in subsidiaries |
|
|
531,363 |
|
|
453,237 |
|
|
— |
|
|
— |
|
|
(984,600) |
|
|
— |
|
|
Total assets |
|
$ |
574,193 |
|
$ |
1,626,011 |
|
$ |
1,786,958 |
|
$ |
638 |
|
$ |
(2,101,100) |
|
$ |
1,886,700 |
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
— |
|
$ |
13 |
|
$ |
36,514 |
|
$ |
— |
|
$ |
— |
|
$ |
36,527 |
|
|
Oil and gas sales payable |
|
|
— |
|
|
— |
|
|
28,339 |
|
|
— |
|
|
— |
|
|
28,339 |
|
|
Accrued liabilities |
|
|
3,874 |
|
|
11,227 |
|
|
10,597 |
|
|
9 |
|
|
— |
|
|
25,707 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
14,650 |
|
|
— |
|
|
— |
|
|
— |
|
|
14,650 |
|
|
Other current liabilities |
|
|
— |
|
|
1,984 |
|
|
600 |
|
|
— |
|
|
— |
|
|
2,584 |
|
|
Intercompany payable |
|
|
— |
|
|
— |
|
|
1,113,704 |
|
|
2,796 |
|
|
(1,116,500) |
|
|
— |
|
|
Total current liabilities |
|
|
3,874 |
|
|
27,874 |
|
|
1,189,754 |
|
|
2,805 |
|
|
(1,116,500) |
|
|
107,807 |
|
|
Long-term debt |
|
|
— |
|
|
724,009 |
|
|
— |
|
|
— |
|
|
— |
|
|
724,009 |
|
|
Deferred revenue |
|
|
— |
|
|
7,049 |
|
|
— |
|
|
— |
|
|
— |
|
|
7,049 |
|
|
Commodity derivative liabilities |
|
|
— |
|
|
1,209 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,209 |
|
|
Asset retirement obligations |
|
|
— |
|
|
— |
|
|
19,458 |
|
|
— |
|
|
— |
|
|
19,458 |
|
|
Liability under tax receivable agreement |
|
|
43,045 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
43,045 |
|
|
Other liabilities |
|
|
— |
|
|
269 |
|
|
523 |
|
|
— |
|
|
— |
|
|
792 |
|
|
Deferred tax liabilities |
|
|
85 |
|
|
2,820 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,905 |
|
|
Total liabilities |
|
|
47,004 |
|
|
763,230 |
|
|
1,209,735 |
|
|
2,805 |
|
|
(1,116,500) |
|
|
906,274 |
|
|
Mezzanine equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A preferred stock, $0.001 par value; 1,840,000 shares issued and outstanding at December 31, 2016 |
|
|
88,975 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
88,975 |
|
|
Stockholders’/ members' equity (deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Members' equity |
|
|
— |
|
|
862,781 |
|
|
577,223 |
|
|
(2,167) |
|
|
(1,437,837) |
|
|
— |
|
|
Class A common stock, $0.001 par value; 57,048,076 shares issued and 57,025,474 shares outstanding at December 31, 2016 |
|
|
57 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
57 |
|
|
Class B common stock, $0.001 par value; 29,832,098 shares issued and outstanding at December 31, 2016 |
|
|
30 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
30 |
|
|
Treasury stock, at cost: 22,602 shares at December 31, 2016 |
|
|
(358) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(358) |
|
|
Additional paid-in-capital |
|
|
447,137 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
447,137 |
|
|
Retained earnings (deficit) |
|
|
(8,652) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(8,652) |
|
|
Stockholders' equity (deficit) |
|
|
438,214 |
|
|
862,781 |
|
|
577,223 |
|
|
(2,167) |
|
|
(1,437,837) |
|
|
438,214 |
|
|
Non-controlling interest |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
453,237 |
|
|
453,237 |
|
|
Total stockholders’ equity |
|
|
438,214 |
|
|
862,781 |
|
|
577,223 |
|
|
(2,167) |
|
|
(984,600) |
|
|
891,451 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
574,193 |
|
$ |
1,626,011 |
|
$ |
1,786,958 |
|
$ |
638 |
|
$ |
(2,101,100) |
|
$ |
1,886,700 |
|
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
48,114 |
|
$ |
— |
|
$ |
— |
|
$ |
48,114 |
|
||||||
|
Other revenues |
|
|
— |
|
|
485 |
|
|
27 |
|
|
— |
|
|
— |
|
|
512 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
485 |
|
|
48,141 |
|
|
— |
|
|
— |
|
|
48,626 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
9,425 |
|
|
— |
|
|
— |
|
|
9,425 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
2,790 |
|
|
— |
|
|
— |
|
|
2,790 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
6,725 |
|
|
— |
|
|
— |
|
|
6,725 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
45,313 |
|
|
23 |
|
|
— |
|
|
45,336 |
|
||||||
|
Impairment of oil and gas properties |
|
|
— |
|
|
— |
|
|
161,886 |
|
|
— |
|
|
— |
|
|
161,886 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
266 |
|
|
— |
|
|
— |
|
|
266 |
|
||||||
|
General and administrative |
|
|
— |
|
|
2,920 |
|
|
5,626 |
|
|
87 |
|
|
— |
|
|
8,633 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
2,920 |
|
|
232,031 |
|
|
110 |
|
|
— |
|
|
235,061 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(2,435) |
|
|
(183,890) |
|
|
(110) |
|
|
— |
|
|
(186,435) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(12,941) |
|
|
264 |
|
|
— |
|
|
— |
|
|
(12,677) |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
21,527 |
|
|
— |
|
|
— |
|
|
— |
|
|
21,527 |
|
||||||
|
Other income (expense) |
|
|
29,913 |
|
|
(24) |
|
|
(55) |
|
|
— |
|
|
— |
|
|
29,834 |
|
||||||
|
Other income (expense), net |
|
|
29,913 |
|
|
8,562 |
|
|
209 |
|
|
— |
|
|
— |
|
|
38,684 |
|
||||||
|
Income (loss) before income tax |
|
|
29,913 |
|
|
6,127 |
|
|
(183,681) |
|
|
(110) |
|
|
— |
|
|
(147,751) |
|
||||||
|
Equity interest in income (loss) |
|
|
(121,557) |
|
|
(56,107) |
|
|
— |
|
|
— |
|
|
177,664 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(2,405) |
|
|
(14) |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,419) |
|
||||||
|
Net income (loss) |
|
|
(89,239) |
|
|
(49,966) |
|
|
(183,681) |
|
|
(110) |
|
|
177,664 |
|
|
(145,332) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(56,093) |
|
|
(56,093) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(89,239) |
|
$ |
(49,966) |
|
$ |
(183,681) |
|
$ |
(110) |
|
$ |
233,757 |
|
$ |
(89,239) |
|
||||||
|
Dividends and accretion on preferred stock |
|
|
(1,966) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,966) |
|
||||||
|
Net income (loss) attributable to common shareholders |
|
$ |
(91,205) |
|
$ |
(49,966) |
|
$ |
(183,681) |
|
$ |
(110) |
|
$ |
233,757 |
|
$ |
(91,205) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
88,791 |
|
$ |
— |
|
$ |
— |
|
$ |
88,791 |
|
||||||
|
Other revenues |
|
|
— |
|
|
942 |
|
|
126 |
|
|
— |
|
|
— |
|
|
1,068 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
942 |
|
|
88,917 |
|
|
— |
|
|
— |
|
|
89,859 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
18,231 |
|
|
— |
|
|
— |
|
|
18,231 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
1,884 |
|
|
— |
|
|
— |
|
|
1,884 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
9,669 |
|
|
— |
|
|
— |
|
|
9,669 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
80,945 |
|
|
45 |
|
|
— |
|
|
80,990 |
|
||||||
|
Impairment of oil and gas properties |
|
|
— |
|
|
— |
|
|
161,886 |
|
|
— |
|
|
— |
|
|
161,886 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
467 |
|
|
— |
|
|
— |
|
|
467 |
|
||||||
|
General and administrative |
|
|
— |
|
|
5,913 |
|
|
10,630 |
|
|
131 |
|
|
— |
|
|
16,674 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
5,913 |
|
|
283,712 |
|
|
176 |
|
|
— |
|
|
289,801 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(4,971) |
|
|
(194,795) |
|
|
(176) |
|
|
— |
|
|
(199,942) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(25,755) |
|
|
191 |
|
|
— |
|
|
— |
|
|
(25,564) |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
43,847 |
|
|
— |
|
|
— |
|
|
— |
|
|
43,847 |
|
||||||
|
Other income (expense) |
|
|
30,581 |
|
|
(48) |
|
|
(119) |
|
|
— |
|
|
— |
|
|
30,414 |
|
||||||
|
Other income (expense), net |
|
|
30,581 |
|
|
18,044 |
|
|
72 |
|
|
— |
|
|
— |
|
|
48,697 |
|
||||||
|
Income (loss) before income tax |
|
|
30,581 |
|
|
13,073 |
|
|
(194,723) |
|
|
(176) |
|
|
— |
|
|
(151,245) |
|
||||||
|
Equity interest in income (loss) |
|
|
(123,611) |
|
|
(58,215) |
|
|
— |
|
|
— |
|
|
181,826 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(2,404) |
|
|
6 |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,398) |
|
||||||
|
Net income (loss) |
|
|
(90,626) |
|
|
(45,148) |
|
|
(194,723) |
|
|
(176) |
|
|
181,826 |
|
|
(148,847) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(58,221) |
|
|
(58,221) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(90,626) |
|
$ |
(45,148) |
|
$ |
(194,723) |
|
$ |
(176) |
|
$ |
240,047 |
|
$ |
(90,626) |
|
||||||
|
Dividends and accretion on preferred stock |
|
|
(3,993) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,993) |
|
||||||
|
Net income (loss) attributable to common shareholders |
|
$ |
(94,619) |
|
$ |
(45,148) |
|
$ |
(194,723) |
|
$ |
(176) |
|
$ |
240,047 |
|
$ |
(94,619) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Three Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
28,398 |
|
$ |
— |
|
$ |
— |
|
$ |
28,398 |
|
||||||
|
Other revenues |
|
|
— |
|
|
596 |
|
|
150 |
|
|
— |
|
|
— |
|
|
746 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
596 |
|
|
28,548 |
|
|
— |
|
|
— |
|
|
29,144 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
7,545 |
|
|
— |
|
|
— |
|
|
7,545 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
1,727 |
|
|
— |
|
|
— |
|
|
1,727 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
77 |
|
|
— |
|
|
— |
|
|
77 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
38,118 |
|
|
19 |
|
|
— |
|
|
38,137 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
297 |
|
|
— |
|
|
— |
|
|
297 |
|
||||||
|
General and administrative |
|
|
— |
|
|
3,293 |
|
|
4,806 |
|
|
27 |
|
|
— |
|
|
8,126 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
3,293 |
|
|
52,570 |
|
|
46 |
|
|
— |
|
|
55,909 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(2,697) |
|
|
(24,022) |
|
|
(46) |
|
|
— |
|
|
(26,765) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(12,727) |
|
|
(80) |
|
|
— |
|
|
— |
|
|
(12,807) |
|
||||||
|
Gain on debt extinguishment |
|
|
— |
|
|
8,878 |
|
|
— |
|
|
— |
|
|
— |
|
|
8,878 |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
(40,002) |
|
|
— |
|
|
— |
|
|
— |
|
|
(40,002) |
|
||||||
|
Other income (expense) |
|
|
(267) |
|
|
(73) |
|
|
2 |
|
|
— |
|
|
— |
|
|
(338) |
|
||||||
|
Other income (expense), net |
|
|
(267) |
|
|
(43,924) |
|
|
(78) |
|
|
— |
|
|
— |
|
|
(44,269) |
|
||||||
|
Income (loss) before income tax |
|
|
(267) |
|
|
(46,621) |
|
|
(24,100) |
|
|
(46) |
|
|
— |
|
|
(71,034) |
|
||||||
|
Equity interest in income (loss) |
|
|
(35,100) |
|
|
(35,667) |
|
|
— |
|
|
— |
|
|
70,767 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(12,122) |
|
|
(266) |
|
|
— |
|
|
— |
|
|
— |
|
|
(12,388) |
|
||||||
|
Net income (loss) |
|
|
(23,245) |
|
|
(82,022) |
|
|
(24,100) |
|
|
(46) |
|
|
70,767 |
|
|
(58,646) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(35,401) |
|
|
(35,401) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(23,245) |
|
$ |
(82,022) |
|
$ |
(24,100) |
|
$ |
(46) |
|
$ |
106,168 |
|
$ |
(23,245) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
||||||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
|
Issuers |
|
|
Subsidiaries |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
||||||
|
Operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Oil and gas sales |
|
$ |
— |
|
$ |
— |
|
$ |
53,478 |
|
$ |
— |
|
$ |
— |
|
$ |
53,478 |
|
||||||
|
Other revenues |
|
|
— |
|
|
1,241 |
|
|
283 |
|
|
— |
|
|
— |
|
|
1,524 |
|
||||||
|
Total operating revenues |
|
|
— |
|
|
1,241 |
|
|
53,761 |
|
|
— |
|
|
— |
|
|
55,002 |
|
||||||
|
Operating costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Lease operating |
|
|
— |
|
|
— |
|
|
16,162 |
|
|
— |
|
|
— |
|
|
16,162 |
|
||||||
|
Production and ad valorem taxes |
|
|
— |
|
|
— |
|
|
3,328 |
|
|
— |
|
|
— |
|
|
3,328 |
|
||||||
|
Exploration |
|
|
— |
|
|
— |
|
|
239 |
|
|
— |
|
|
— |
|
|
239 |
|
||||||
|
Depletion, depreciation and amortization |
|
|
— |
|
|
— |
|
|
79,857 |
|
|
42 |
|
|
— |
|
|
79,899 |
|
||||||
|
Accretion of ARO liability |
|
|
— |
|
|
— |
|
|
590 |
|
|
— |
|
|
— |
|
|
590 |
|
||||||
|
General and administrative |
|
|
— |
|
|
6,171 |
|
|
9,407 |
|
|
52 |
|
|
— |
|
|
15,630 |
|
||||||
|
Total operating expenses |
|
|
— |
|
|
6,171 |
|
|
109,583 |
|
|
94 |
|
|
— |
|
|
115,848 |
|
||||||
|
Operating income (loss) |
|
|
— |
|
|
(4,930) |
|
|
(55,822) |
|
|
(94) |
|
|
— |
|
|
(60,846) |
|
||||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Interest expense |
|
|
— |
|
|
(27,766) |
|
|
161 |
|
|
— |
|
|
— |
|
|
(27,605) |
|
||||||
|
Gain on debt extinguishment |
|
|
— |
|
|
99,530 |
|
|
— |
|
|
— |
|
|
— |
|
|
99,530 |
|
||||||
|
Net gain (loss) on commodity derivatives |
|
|
— |
|
|
(22,783) |
|
|
— |
|
|
— |
|
|
— |
|
|
(22,783) |
|
||||||
|
Other income (expense) |
|
|
162 |
|
|
(274) |
|
|
(1) |
|
|
— |
|
|
— |
|
|
(113) |
|
||||||
|
Other income (expense), net |
|
|
162 |
|
|
48,707 |
|
|
160 |
|
|
— |
|
|
— |
|
|
49,029 |
|
||||||
|
Income (loss) before income tax |
|
|
162 |
|
|
43,777 |
|
|
(55,662) |
|
|
(94) |
|
|
— |
|
|
(11,817) |
|
||||||
|
Equity interest in income (loss) |
|
|
(6,132) |
|
|
(5,847) |
|
|
— |
|
|
— |
|
|
11,979 |
|
|
— |
|
||||||
|
Income tax provision (benefit) |
|
|
(1,636) |
|
|
(49) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,685) |
|
||||||
|
Net income (loss) |
|
|
(4,334) |
|
|
37,979 |
|
|
(55,662) |
|
|
(94) |
|
|
11,979 |
|
|
(10,132) |
|
||||||
|
Net income (loss) attributable to non-controlling interests |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,798) |
|
|
(5,798) |
|
||||||
|
Net income (loss) attributable to controlling interests |
|
$ |
(4,334) |
|
$ |
37,979 |
|
$ |
(55,662) |
|
$ |
(94) |
|
$ |
17,777 |
|
$ |
(4,334) |
|
||||||
Jones Energy, Inc.
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2017
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(90,626) |
|
$ |
(45,148) |
|
$ |
(194,723) |
|
$ |
(176) |
|
$ |
181,826 |
|
$ |
(148,847) |
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
|
|
60,656 |
|
|
(2,685) |
|
|
294,004 |
|
|
176 |
|
|
(181,826) |
|
|
170,325 |
|
|
Net cash (used in) / provided by operations |
|
|
(29,970) |
|
|
(47,833) |
|
|
99,281 |
|
|
— |
|
|
— |
|
|
21,478 |
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas properties |
|
|
— |
|
|
— |
|
|
(107,250) |
|
|
— |
|
|
— |
|
|
(107,250) |
|
|
Net adjustments to purchase price of properties acquired |
|
|
— |
|
|
— |
|
|
2,391 |
|
|
— |
|
|
— |
|
|
2,391 |
|
|
Proceeds from sales of assets |
|
|
— |
|
|
— |
|
|
2,730 |
|
|
— |
|
|
— |
|
|
2,730 |
|
|
Acquisition of other property, plant and equipment |
|
|
— |
|
|
— |
|
|
(436) |
|
|
— |
|
|
— |
|
|
(436) |
|
|
Current period settlements of matured derivative contracts |
|
|
— |
|
|
45,738 |
|
|
— |
|
|
— |
|
|
— |
|
|
45,738 |
|
|
Net cash (used in) / provided by investing |
|
|
— |
|
|
45,738 |
|
|
(102,565) |
|
|
— |
|
|
— |
|
|
(56,827) |
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
75,000 |
|
|
Repayment of long-term debt |
|
|
— |
|
|
(72,000) |
|
|
— |
|
|
— |
|
|
— |
|
|
(72,000) |
|
|
Payment of cash dividends on preferred stock |
|
|
(3,367) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,367) |
|
|
Net distributions paid to JEH unitholders |
|
|
1,075 |
|
|
(1,637) |
|
|
— |
|
|
— |
|
|
— |
|
|
(562) |
|
|
Net payments for share based compensation |
|
|
— |
|
|
(462) |
|
|
— |
|
|
— |
|
|
— |
|
|
(462) |
|
|
Proceeds from sale of common stock |
|
|
8,352 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,352 |
|
|
Net cash (used in) / provided by financing |
|
|
6,060 |
|
|
901 |
|
|
— |
|
|
— |
|
|
— |
|
|
6,961 |
|
|
Net increase (decrease) in cash |
|
|
(23,910) |
|
|
(1,194) |
|
|
(3,284) |
|
|
— |
|
|
— |
|
|
(28,388) |
|
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period |
|
|
27,164 |
|
|
1,975 |
|
|
5,483 |
|
|
20 |
|
|
— |
|
|
34,642 |
|
|
End of period |
|
$ |
3,254 |
|
$ |
781 |
|
$ |
2,199 |
|
$ |
20 |
|
$ |
— |
|
$ |
6,254 |
|
Jones Energy, Inc.
Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2016
|
|
|
|
|
|
|
|
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|
|
||
|
(in thousands of dollars) |
|
JEI (Parent) |
|
Issuers |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
||||||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(4,334) |
|
$ |
37,979 |
|
$ |
(55,662) |
|
$ |
(94) |
|
$ |
11,979 |
|
$ |
(10,132) |
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities |
|
|
3,278 |
|
|
(86,767) |
|
|
111,506 |
|
|
94 |
|
|
(11,979) |
|
|
16,132 |
|
|
Net cash (used in) / provided by operations |
|
|
(1,056) |
|
|
(48,788) |
|
|
55,844 |
|
|
— |
|
|
— |
|
|
6,000 |
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas properties |
|
|
— |
|
|
— |
|
|
(27,592) |
|
|
— |
|
|
— |
|
|
(27,592) |
|
|
Proceeds from sales of assets |
|
|
— |
|
|
— |
|
|
5 |
|
|
— |
|
|
— |
|
|
5 |
|
|
Acquisition of other property, plant and equipment |
|
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
— |
|
|
12 |
|
|
Current period settlements of matured derivative contracts |
|
|
— |
|
|
77,622 |
|
|
— |
|
|
— |
|
|
— |
|
|
77,622 |
|
|
Net cash (used in) / provided by investing |
|
|
— |
|
|
77,622 |
|
|
(27,575) |
|
|
— |
|
|
— |
|
|
50,047 |
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
— |
|
|
75,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
75,000 |
|
|
Purchase of senior notes |
|
|
— |
|
|
(84,589) |
|
|
— |
|
|
— |
|
|
— |
|
|
(84,589) |
|
|
Net distributions paid to JEH unitholders |
|
|
9,910 |
|
|
(20,019) |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,109) |
|
|
Proceeds from sale of common stock |
|
|
1,056 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,056 |
|
|
Net cash (used in) / provided by financing |
|
|
10,966 |
|
|
(29,608) |
|
|
— |
|
|
— |
|
|
— |
|
|
(18,642) |
|
|
Net increase (decrease) in cash |
|
|
9,910 |
|
|
(774) |
|
|
28,269 |
|
|
— |
|
|
— |
|
|
37,405 |
|
|
Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Beginning of period |
|
|
100 |
|
|
12,448 |
|
|
9,325 |
|
|
20 |
|
|
— |
|
|
21,893 |
|
|
End of period |
|
$ |
10,010 |
|
$ |
11,674 |
|
$ |
37,594 |
|
$ |
20 |
|
$ |
— |
|
$ |
59,298 |
|
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||
|
|
|
|
|
|
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|
|
|
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|
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|
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