Business context and reporting period
The supplied filing is Centennial Resource Development, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2020. It describes a Delaware Basin-focused Permian oil and gas producer. This does not match the request metadata naming Permian Resources Corp.; verify the issuer and filing before relying on this summary.
Key financial results
| Metric | Q1 2020 | Q1 2019 or prior date |
|---|---|---|
| Oil and gas sales | $192.8 million | $214.6 million |
| Net loss attributable to Class A | $548.0 million; $1.99 per share | $8.1 million; $0.03 per share |
| Net cash from operations | $100.8 million | $101.0 million |
| Cash used in investing | $167.0 million | $218.9 million |
| Cash and cash equivalents | $3.8 million | $10.2 million at December 31, 2019 |
| Long-term debt, net | $1.118 billion | $1.057 billion at December 31, 2019 |
| Total liabilities | $1.379 billion | $1.418 billion at December 31, 2019 |
Operating loss was $608.6 million, driven primarily by $611.3 million of impairment and abandonment expense, including a $591.8 million noncash impairment of proved properties. Oil and gas sales declined 10%; average realized prices fell for oil (6%), natural gas (44%) and NGLs (28%). Total production was nearly flat at 71,820 Boe/d, as higher oil and gas volumes were offset by lower NGL volumes.
Operating cash flow less reported drilling and development capital expenditures of $161.9 million was approximately negative $61.1 million. Total Q1 capital expenditures incurred were $175.4 million. The filing reports $564.2 million of revolver availability at March 31, net of letters of credit, against $235.0 million borrowed. The credit facility’s borrowing base and commitments were subsequently reduced to $700 million on May 1.
Material changes versus the prior comparable period
- Revenue fell $21.8 million, mainly due to weaker realized commodity prices; production volumes were broadly steady.
- Net loss widened substantially from $8.5 million consolidated in Q1 2019, chiefly due to the impairment charge. The company recognized an $83.2 million income tax benefit but recorded a $55.6 million valuation allowance against deferred tax assets.
- Debt increased $60.5 million from year-end, reflecting net revolver borrowings. Interest expense rose to $16.4 million from $10.2 million, largely because the 2027 notes were outstanding for the full quarter.
- Net cash used in investing narrowed year over year as drilling and development spending declined.
Outlook, management commentary, risks and unusual items
- Management suspended drilling and completion activity and reduced its operated rig count to zero in April to preserve capital. It projected 2020 capital spending of $240–$290 million, about 60% below the midpoint of its original $590–$690 million plan, and expected to curtail up to 40% of production in May. Further curtailments were to be assessed monthly.
- Management cited COVID-19 demand disruption, oil-market oversupply and volatility following actions by Saudi Arabia and other producing countries. It warned that prolonged low prices could reduce cash flow, reserves, borrowing capacity and asset values, and could affect debt covenant compliance. It reported no material operational disruption from COVID-19 to date.
- Oil swaps covered an average of approximately 19,400 barrels per day for April–December 2020 at a weighted average price of $26.79 per barrel, according to the MD&A; hedging does not cover all production.
- The planned sale of water-disposal assets for approximately $150 million cash plus up to $75 million in deferred incentives was delayed. Either party could terminate if it did not close by May 15, 2020.
- On April 22, the company commenced offers to exchange existing unsecured notes for up to $450 million of new secured notes carrying 8% interest. These offers were pending in the filing. The May 1 credit amendments reduced borrowing base and commitments, suspended the total-debt-to-EBITDAX test through year-end 2021, and introduced a first-lien leverage covenant.
- On April 21, the company received a Nasdaq notice because its share price had remained below $1. The filing said the compliance deadline was extended to December 28, 2020; delisting remained a risk if compliance was not restored.
- The company reported compliance with applicable credit and note covenants as of March 31 and through filing. Management considered material adverse outcomes from disclosed ordinary-course legal matters remote.
Important facts for investors to verify
- Confirm the issuer identity: the provided filing is for Centennial Resource Development, Inc., not Permian Resources Corp.
- Check whether the water-disposal asset sale closed, was terminated, or changed terms, and whether expected proceeds became available.
- Verify the outcome and final terms of the senior-note exchange offers, including resulting debt, interest expense and lien priority.
- Review the amended credit facility’s final availability, borrowing restrictions and first-lien covenant headroom.
- Track actual production curtailments, subsequent capital spending, commodity prices and any further impairment charges.
- Confirm whether the company regained Nasdaq’s minimum bid-price compliance and whether any further listing action occurred.