AUSTIN, Texas--(BUSINESS WIRE)-- Jones Energy, Inc. (NYSE: JONE) (“Jones Energy” or “the Company”) today announced financial and operating results for the quarter ended March 31, 2015. For the quarter ended March 31, 2015, the Company reported net income of $5.7 million, adjusted net income of $2.9 million, and EBITDAX of $71.2 million.

2015 First Quarter Highlights

• Average daily net production for the quarter was 26.4 MBoe/d (above the top end of guidance); oil production in the first quarter of 2015 was 8.4 MBoe/d, up 27% from the fourth quarter of 2014
• Cleveland daily net production for the quarter was 19.0 MBoe/d, up 11% from the fourth quarter of 2014; oil composed 41% of the total average daily volume
• Spud twelve 33 stage open-hole wells to date, eleven of which have been completed and are either flowing back or producing; production results consistent with expectations
• Achieved targeted 30% cost savings that reduced the Cleveland 33 stage open-hole AFE from $3.8 million to $2.65 million two months ahead of plan
• Achieved new company records for spud to rig release of 13.7 days and one day lateral length drilled of over 1,900 feet
• Reaffirmed borrowing base for senior secured revolving credit facility at $562.5 million

Jonny Jones , the Company’s Founder, Chairman and CEO, commented, “I am excited about our first quarter results, which reflect the success of our intense focus on managing costs and executing our plan for the year. We continue to drive down costs and as a result, well level returns have reached the threshold that supports our planned increase in activity from three to five rigs. Our return to open-hole completions has eliminated the sand flowback issues we were facing last year and is helping to reduce cycle times. In fact, we were able to achieve new company records for both spud to rig release and lateral length drilled in a single day in the first quarter. The spud to rig release record was almost two full days faster than our previous best, and this is in a formation where we have drilled more than 500 horizontal wells over a ten year period.” Mr. Jones went on to say, “I am very proud of what our team has accomplished thus far in 2015. We are likely one of the few companies that will be adding rigs in the middle of the year and we are doing so with a cash flow neutral program. As we add rigs, we will continue to hedge production in order to lock in our favorable margins.

“Our capital raise during the first quarter has positioned us to take advantage of the many opportunities we are starting to see in the market. Our borrowing base was reaffirmed at $562.5 million in April and could have been increased. First quarter capex was spot on compared to our expectations and has us on track to meet or beat our annual guidance. Looking forward, we will continue to exploit any additional efficiencies that the current environment presents in order to maximize the return to our shareholders. Over the past six months, the oil and gas industry has faced significant headwinds, but this is the type of environment where we have thrived in the past and should allow us to differentiate ourselves. As we’ve seen before, environments like these often present excellent growth opportunities to those who are prepared.”

Financial Results

Total operating revenues for the three months ended March 31, 2015 were $58.1 million as compared to $98.2 million for the three months ended March 31, 2014. The decrease was due to lower commodity prices, which was somewhat offset by higher production.

Total operating expenses for the three months ended March 31, 2015 were $79.9 million as compared to $64.2 million for the three months ended March 31, 2014. The increase was primarily due to increased production which resulted in higher lease operating and depletion, depreciation, and amortization expenses. The Company also incurred certain non-recurring charges which were included in other operating expenses.

Adjusted net income for the three months ended March 31, 2015 was $2.9 million as compared to $17.6 million for the three months ended March 31, 2014. The decrease was primarily due to lower average realized prices for all commodities and an increase in operating expenses, which more than offset higher production volumes.

Operational Results

Cleveland

All of the Company’s first quarter development activity was focused on the Cleveland. During the first quarter, the Company spud 14 wells and completed 27 wells, with a total of 34 wells seeing first production during the quarter. As of March 31, 2015, four wells were in various stages of completion, and the Company had three rigs running.

Daily net production in the Cleveland was 19.0 MBoe/d in the first quarter of 2015, up 11% from the fourth quarter of 2014 and up 22% from the first quarter of 2014, despite running only three rigs for the majority of the quarter. Cleveland oil production for the first quarter of 2015 increased by 25% compared to the fourth quarter of 2014. The increase in oil production was a result of reducing the backlog of drilled but uncompleted wells from the fourth quarter of 2014 along with a significant reduction in overall cycle times. The last of the sliding sleeve wells drilled in 2014 and carried into the year were completed during January 2015 and future activity is expected to utilize the open-hole well design. To date, the Company has spud twelve 33 stage open-hole wells, eleven of which have been completed and are either flowing back or producing. Importantly, the production results for the 33 stage wells are consistent with the projected type curve, which was derived from the 64 wells drilled as part of the Company’s 2013 and 2014 completion optimization work.

The current estimated cost of a 33 stage well is below $2.65 million, reflecting a 30% decrease from the December 2014 estimate for the same well. The Company’s goal at the outset of 2015 was to reach this cost target by mid-year and it has been achieved two months early. The Company is also seeing efficiency improvements as shifting back to open-hole completions has resulted in a 50% improvement in average spud to sales times since October 2014. In March 2015, the Company set a new all-time record for spud to rig release of just 13.7 days, achieving this record in a play where the Company has drilled more than 500 horizontal wells.

Capital Expenditures

During the first quarter of 2015, the Company spent $82.6 million, of which $76.1 million was related to drilling and completing wells, representing 92% of total capital expenditures in the quarter. These figures are consistent with the Company’s expectations for the quarter and the level of capital spending is expected to drop significantly in the second quarter. This reduction in drilling and completion activity during the second quarter along with expected lower costs per well should result in greatly reduced spending across the remainder of 2015. The Company expects the $127 million of projected capital spend for the remainder of this year to be relatively evenly distributed throughout the remaining three quarters of the year.

Liquidity and Hedging

During the first quarter, the Company completed three capital market transactions: a private placement of $250 million of 9.25% senior unsecured notes due 2023, a registered direct offering of $50 million of common stock, and a public offering of common stock which raised nearly $77 million in gross proceeds. Total net proceeds of approximately $355 million were used to pay down the balance of the Company’s credit facility. On April 17, 2015, the Company’s borrowing base on its senior secured revolving credit facility was reaffirmed at $562.5 million. The Company’s lead administrative agent had approved a borrowing base increase to $610 million. However, the Company elected to maintain its $562.5 million borrowing base given its substantial liquidity position. As of March 31, 2015, the Company had an undrawn credit facility balance of $472.5 million and approximately $28 million in cash.

During the first quarter and into the second quarter of 2015, the Company has continued to add to its hedge position. The Company has hedged 85% of its estimated oil and natural gas production through 2016 at approximately $85 per barrel and $4.50 per Mcf. A large portion of the Company’s estimated 2015 natural gas liquids production is hedged as well. The Company also has oil and natural gas hedges in place for 2017, 2018, and the first quarter of 2019, although at less significant volume levels. A table providing the latest summary hedge positions is shown below.

Guidance

The Company is providing guidance for the second quarter and affirming guidance for the full year 2015 as follows:

Conference Call Details

Jones Energy will host a conference call for investors and analysts to discuss its results for the first quarter on Thursday, May 7, 2015 at 10:30 a.m. ET (9:30 a.m. CT). The conference call can be accessed via webcast through the Investor Relations section of Jones Energy’s website, www.jonesenergy.com, or by dialing (877) 201-0168 (for domestic U.S.) or (647) 788-4901 (International) and entering conference code 28365989. If you are not able to participate in the conference call, an audio replay will be available through May 14, 2015, by dialing (855) 859-2056 (for domestic U.S.) or (404) 537-3406 (International) and entering conference code 28365989. A replay of the conference call may also be found on the Company’s website, www.jonesenergy.com.

About Jones Energy

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

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including guidance regarding the timing and location of our anticipated drilling and completion activity, our ability and the ability of other companies to add rigs in the middle of the year, our ability to take advantage of additional cost efficiencies, our ability to reduce spending in connection with a reduction in drilling and completion activity, results of our 33 stage open-hole completion technique in the Cleveland formation including projected uplifts in oil production, our ability to mitigate commodity price risk through our hedging program, and our ability to successfully execute our 2015 development plan and guidance for the second quarter and full year 2015. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, changes in oil, natural gas liquids, and natural gas prices, weather and environmental conditions, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, customers’ elections to reject ethane and include it as part of the natural gas stream for the remainder of 2015, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company’s business and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the SEC.

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

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

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

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

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

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

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

Source: Jones Energy, Inc.