Jones Energy, Inc. Announces 2016 Third Quarter Financial And Operating Results And Increases 2016 Guidance

AUSTIN, Texas, Nov. 02, 2016 (GLOBE NEWSWIRE) -- Jones Energy, Inc. (NYSE:JONE) ("Jones Energy" or "the Company") today announced financial and operating results for the quarter ended September 30, 2016 as well as increased 2016 production and capital guidance.   

Highlights
  • Average daily net production for the third quarter of 2016 of 18.6 MBoe/d, above the top end of guidance
  • Completed two acquisitions in the third quarter of 2016, including transformative $136.5 million STACK/SCOOP acquisition and bolt-on $26.3 million Anadarko acquisition
  • Raised $152.3 million in net proceeds from common stock and convertible preferred stock issuance
  • Expect to deploy first rig on new STACK/SCOOP asset in December 2016
  • Increasing full year 2016 production guidance to 18.6 - 19.4 MBoe/d
  • Lowering 2016 LOE guidance due to significant realized cost savings
  • Increasing full year 2016 capital guidance to $110 million primarily due to higher average working interest associated with Cleveland development program and expected STACK/SCOOP leasing
  • Borrowing base maintained at $425 million with fall redetermination 
  • Net loss for the third quarter of 2016 of $22.4 million and EBITDAX of $46.8 million

Jonny Jones, the Company's Founder, Chairman, and CEO, commented, "We had an active third quarter, which included completing two meaningful acquisitions and continuing to execute on our three rig Cleveland program.  We are excited to get to work on our new STACK/SCOOP asset and expect to have our first rig in the field in December.  Our recent opening of an Oklahoma City office gives us a local presence, which will help us realize the full potential of this exciting new asset."  Mr. Jones went on to say, "As a result of our solid operating momentum and compelling opportunity set, we are raising 2016 production and capital guidance while lowering LOE guidance.  I am pleased with the significant progress we have made year-to-date on achieving our goals and I look forward to providing you with additional updates in the future."   

Financial Results

Total operating revenues for the three months ended September 30, 2016 were $33.4 million as compared to $47.2 million for the three months ended September 30, 2015.  Total revenues including current period settlements of matured derivative contracts were $60.9 million for the three months ended September 30, 2016 as compared to $86.4 million for the three months ended September 30, 2015.  The decrease was primarily due to lower production volumes.

Total operating expenses for the three months ended September 30, 2016 were $53.9 million as compared to $79.5 million for the three months ended September 30, 2015.  Total operating expenses decreased compared to the same period last year primarily due to lower lease operating expense, production and ad valorem tax expense, exploration expense, depreciation, depletion, and amortization expense, and general and administrative expense.  

For the three months ended September 30, 2016, the Company reported a net loss of $22.4 million and an adjusted net loss of $1.0 million, as compared to net income of $34.8 million and an adjusted net loss of $1.6 million for the three months ended September 30, 2015.  The decrease was primarily due to lower production, which was partially offset by a decrease in operating expenses.

Operating Results

Cleveland

The Company resumed its drilling program in April 2016 and has had three rigs running since June 2016.  During the third quarter, the Company spud 18 wells, completed 15 wells, and brought 13 wells online.  Year-to-date through September 30, 2016, the Company has brought online a total of 19 wells.  Average daily net production in the Cleveland was 13.0 MBoe/d in the third quarter of 2016. 

Capital Expenditures

During the third quarter of 2016, the Company spent $29.3 million on capital expenditures excluding acquisitions, of which $28.4 million was drilling and completion capital and the remainder was related to maintenance capital and spending on non-operated wells, bringing total year-to-date 2016 capital expenditures excluding acquisitions to $53.1 million.  The Company spent $163.6 million on acquisitions in the third quarter, bringing total capital expenditures including acquisitions for the third quarter of 2016 to $192.9 million and year-to-date capital expenditures including acquisitions to $216.7 million.  The $163.6 million in capital expenditures on acquisitions includes the $136.5 million STACK/SCOOP acquisition and the $26.3 million Anadarko acquisition, which were both completed in the third quarter of 2016.  

Updated Guidance

The Company is increasing its 2016 production and capital guidance and is also providing production guidance for the fourth quarter of 2016. Projected average production for the full year 2016 is expected to be between 18.6 MBoe/d and 19.4 MBoe/d.  Higher 2016 production guidance is driven by continued base business outperformance as well as increased average working interest in our Cleveland development program.  We are also increasing 2016 capital guidance to $110 million primarily due to the higher average Cleveland working interest, the spudding of our first well in the STACK/SCOOP trend, and expected opportunities to lease or acquire additional acreage in the STACK/SCOOP trend.     

We plan to spud approximately 40 gross wells in 2016 and are beating our $2.03 million Cleveland AFE.  We now forecast average working interest for our 2016 Cleveland development program to be between 85% and 90%, an increase from our previous guidance of approximately 80%.

We are lowering our 2016 lease operating expense guidance due to the realization of significant cost savings year-to-date.  We are slightly increasing our 2016 cash G&A guidance primarily due to deal expenses and the opening of our new office in Oklahoma City.

Fourth quarter 2016 production is projected to be between 18.2 MBoe/d and 19.2 MBoe/d. 

A table has been provided below with full year and fourth quarter 2016 guidance by category:
2016 Guidance                      
  Previous 2016E   Current 2016E   4Q16E
Total Production (MMBoe)   6.6   -    7.1       6.9   -    7.1     1.6 -  1.8
Average Daily Production (MBoe/d)   17.9   -   19.4       18.6   -   19.4     18.2 - 19.2
                       
Crude Oil (MBbls/d)   4.5   -    4.9       4.4   -    4.8     4.4 -  4.7
Natural Gas (MMcf/d)   48.0   -   51.9       50.0   -   52.0     50.0 - 52.0
NGLs (MBbls/d)   5.4   -    5.8       5.8   -    6.0     5.6 -  5.8
                       
Lease Operating Expense ($mm) $ 35.0   - $ 38.0     $ 34.0   - $ 36.0          
Production Taxes (% of Unhedged Revenue)*   4.5 % -   5.5 %     4.5 % -   5.5 %        
Ad Valorem Taxes ($mm)* $ 1.5   - $ 1.7     $ 1.5   - $ 1.7          
Cash G&A Expense ($mm) $ 18.0   - $ 20.0     $ 19.0   - $ 21.0          
                       
Total Capital Expenditures Excluding Acquisitions ($mm) $ 90.0     $ 110.0      

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

Liquidity and Hedging

The Company recently completed the fall redetermination of its borrowing base under its senior secured credit facility.  The borrowing base was maintained at $425 million.

As of September 30, 2016, the Company had aggregate principal amount of senior unsecured notes outstanding of $559.1 million, outstanding borrowings under its revolving credit facility of $143.0 million, and approximately $24.0 million in cash.

In the third quarter of 2016, the Company issued 1.84 million shares of its 8.0% Series A Perpetual Convertible preferred stock for net proceeds of approximately $88.3 million.  The Company also issued 24,150,000 shares of Class A common stock at $2.77 per share for net proceeds of approximately $64.0 million. 

In the second quarter of 2016, the Company entered into an equity distribution agreement.  As of September 30, 2016, the Company had issued approximately 0.5 million shares of Class A common stock under its equity distribution agreement for net proceeds of approximately $1.8 million.

The estimated mark-to-market value of the Company's commodity price hedges was approximately $97 million incorporating strip pricing as of October 28, 2016.  The following table summarizes the Company's net commodity derivative contracts outstanding as of October 28, 2016 and also outlines approximately $47 million in crystallized hedge gains in 2018 and 2019:
Current Net Hedge Positions
  Fiscal Year Ending December 31,
    2016 1     2017     2018     2019  
Oil, Natural Gas and NGL Swaps        
Oil (MBbl)   463     1,603       1,014       -   
Natural Gas (MMcf)   4,220     16,780     13,940       -   
         
Ethane (MBbl)     12       -        -        -   
Propane (MBbl)     202       759       -        -   
Iso Butane (MBbl)     24       103       -        -   
Butane (MBbl)     67       264       -        -   
Natural Gasoline (MBbl)     64       252       -        -   
Total NGLs (MBbl)     369       1,378       -        -   
         
Weighted Average Net Prices        
Oil ($ / Bbl) $ 80.89   $ 66.85   $ 51.26       -   
Natural Gas ($ / Mcf) $ 4.18   $ 3.92   $ 2.98       -   
         
Ethane ($ / Gal) $ 0.21      -       -        -   
Propane ($ / Gal) $ 0.52   $ 0.44       -        -   
Iso Butane ($ / Gal) $ 0.60   $ 0.63       -        -   
Butane ($ / Gal) $ 0.65   $ 0.60       -        -   
Natural Gasoline ($ / Gal) $ 1.32   $ 1.00       -        -   
         
Oil and Natural Gas Collars        
Oil (MBbl)     -        -        -        810  
Floor ($ / Bbl)     -        -        -    $ 48.52  
Ceiling ($ / Bbl)     -        -        -    $ 59.64  
         
Natural Gas (MMcf)     -        -        -        11,890  
Floor ($ / Mcf)     -        -        -    $ 2.55  
Ceiling ($ / Mcf)     -        -        -    $ 3.19  
         
Crystallized Hedge Gains        
Value of Gain ($mm)     -        -    $  38.7   $ 8.4  

  12016 hedges shown for the fourth quarter of the year.

Conference Call Details

Jones Energy will host a conference call for investors and analysts to discuss its results on Thursday, November 3, 2016 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 (866) 393-4306 (for domestic U.S.) or (734) 385-2616 (International) and entering conference code 99639309.  If you are not able to participate in the conference call, the webcast replay and a downloadable audio file will be available shortly following the call through the Investor Relations section of 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 number of rigs that will be running in 2016, the timing of the development of the new STACK/SCOOP acreage, the revised 2016 production guidance and capital budget, the anticipated acquisition of additional acreage in the STACK/SCOOP, expectations regarding average working interest, the cost to drill and complete wells and the resultant impact on the revised 2016 capital budget, and projections regarding total production, average daily production, percentage liquids, operating expenses, production and ad valorem taxes as a percentage of revenue, cash G&A expenses and capital expenditure levels for the full year and fourth quarter of 2016.  These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current economic and market conditions, anticipated future developments and other factors believed to be appropriate.  Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements.  These include, but are not limited to, changes in oil and natural gas prices, weather and environmental conditions, the timing and amount of planned capital expenditures, availability and method of funding of acquisitions and divestitures, or the ability to integrate any acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company's ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company's business and other important factors that could cause actual results to differ materially from those projected as described in the Company's reports filed with the SEC.

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

Jones Energy, Inc.Consolidated Statement of Operations (Unaudited)
                           
    Three months ended  September 30,    Nine months ended  September 30,   
(in thousands of dollars except per share data)   2016   2015   2016   2015  
Operating revenues                          
Oil and gas sales   $    32,582     $    46,499     $    86,060     $    156,955    
Other revenues        771          653          2,295          2,210    
Total operating revenues        33,353          47,152          88,355          159,165    
Operating costs and expenses                          
Lease operating        7,865          8,872          24,027          32,930    
Production and ad valorem taxes        1,733          2,513          5,061          9,292    
Exploration        998          5,556          1,237          6,184    
Depletion, depreciation and amortization        36,550          52,766          116,449          156,151    
Accretion of ARO liability        323          210          913          610    
General and administrative        6,448          9,628          22,078          27,572    
Other operating                                4,188    
Total operating expenses        53,917          79,545          169,765          236,927    
Operating income (loss)        (20,564 )        (32,393 )        (81,410 )        (77,762 )  
Other income (expense)                          
Interest expense        (12,792 )        (16,722 )        (40,397 )        (47,553 )  
Gain on debt extinguishment                        99,530            
Net gain (loss) on commodity derivatives        4,014          90,483          (18,769 )        111,714    
Other income (expense)        364          (7 )        251          (1,631 )  
Other income (expense), net        (8,414 )        73,754          40,615          62,530    
Income (loss) before income tax        (28,978 )        41,361          (40,795 )        (15,232 )  
Income tax provision (benefit)        (6,549 )        6,519          (8,234 )        (4,590 )  
Net income (loss)        (22,429 )        34,842          (32,561 )        (10,642 )  
Net income (loss) attributable to non-controlling interests        (12,576 )        21,604          (18,374 )        (7,625 )  
Net income (loss) attributable to controlling interests   $    (9,853 )   $    13,238     $    (14,187 )   $    (3,017 )  
Dividends and accretion on preferred stock        (765 )                (765 )          
Net income (loss) attributable to common shareholders   $    (10,618 )   $    13,238     $    (14,952 )   $    (3,017 )  
                           
Earnings (loss) per share:                          
Basic - Net income (loss) attributable to common shareholders   $    (0.26 )   $    0.44     $    (0.44 )   $    (0.12 )  
Diluted - Net income (loss) attributable to common shareholders   $    (0.26 )   $    0.44     $    (0.44 )   $    (0.12 )  
                           
Weighted average shares outstanding:                          
Basic        41,375          30,432          34,300          25,591    
Diluted        41,375          30,432          34,300          25,591    
                                           

Jones Energy, Inc.Consolidated Balance Sheet (Unaudited)
               
    September 30,    December 31,   
(in thousands of dollars)   2016   2015  
Assets              
Current assets              
Cash   $    24,041     $    21,893    
Accounts receivable, net              
Oil and gas sales        20,720          19,292    
Joint interest owners        4,880          11,314    
Other        10,015          15,170    
Commodity derivative assets        48,784          124,207    
Other current assets        2,603          2,298    
Total current assets        111,043          194,174    
Oil and gas properties, net, at cost under the successful efforts method        1,742,165          1,635,766    
Other property, plant and equipment, net        3,186          3,873    
Commodity derivative assets        50,469          93,302    
Other assets        6,406          8,039    
Total assets   $    1,913,269     $    1,935,154    
Liabilities and Stockholders' Equity              
Current liabilities              
Trade accounts payable   $    27,328     $    7,467    
Oil and gas sales payable        26,445          32,408    
Accrued liabilities        28,793          27,011    
Commodity derivative liabilities        1,618          11    
Asset retirement obligations        679          679    
Total current liabilities        84,863          67,576    
Long-term debt        688,432          837,654    
Deferred revenue        9,589          11,417    
Commodity derivative liabilities        526            
Asset retirement obligations        27,452          20,301    
Liability under tax receivable agreement        43,212          38,052    
Other liabilities        656          330    
Deferred tax liabilities        16,070          22,972    
Total liabilities        870,800          998,302    
Commitments and contingencies              
Mezzanine equity              
Series A preferred stock, $0.001 par value; 1,840,000 shares issued and outstanding at September 30, 2016 and no shares issued and outstanding at December 31, 2015        88,743            
Stockholders' equity              
Class A common stock, $0.001 par value; 56,991,824 shares issued and 56,969,222 shares outstanding at September 30, 2016 and 30,573,509 shares issued and 30,550,907 shares outstanding at December 31, 2015        57          31    
Class B common stock, $0.001 par value; 29,872,426 shares issued and outstanding at September 30, 2016 and 31,273,130 shares issued and outstanding at December 31, 2015        30          31    
Treasury stock, at cost: 22,602 shares at September 30, 2016 and December 31, 2015        (358 )        (358 )  
Additional paid-in-capital        447,400          363,723    
Retained (deficit) / earnings        21,617          36,569    
Stockholders' equity        468,746          399,996    
Non-controlling interest        484,980          536,856    
Total stockholders' equity        953,726          936,852    
Total liabilities and stockholders' equity   $    1,913,269     $    1,935,154    
                       

Jones Energy, Inc.Consolidated Statement of Cash Flow Data (Unaudited)
               
    Nine months ended  September 30,   
(in thousands of   dollars)   2016   2015  
Cash flows from operating activities              
Net income (loss)   $    (32,561 )   $    (10,642 )  
Adjustments to reconcile net income (loss) to net cash provided by operating activities              
Depletion, depreciation, and amortization       116,449         156,151    
Exploration (dry hole and lease abandonment)        945          5,250    
Accretion of ARO liability        913          610    
Amortization of debt issuance costs        3,083          3,379    
Stock compensation expense        5,269          5,287    
Deferred and other non-cash compensation expense        614          326    
Amortization of deferred revenue        (1,828 )        (1,521 )  
(Gain) loss on commodity derivatives        18,769          (111,714 )  
(Gain) loss on sales of assets        (68 )        (10 )  
(Gain) on debt extinguishment        (99,530 )          
Deferred income tax provision        (11,824 )        (4,590 )  
Other - net        805          1,178    
Changes in operating assets and liabilities              
Accounts receivable        8,964          54,244    
Other assets        (466 )        719    
Accrued interest expense        (1,050 )        9,577    
Accounts payable and accrued liabilities        6,425          (19,185 )  
Net cash provided by operations       14,909         89,059    
Cash flows from investing activities              
Additions to oil and gas properties        (210,878 )        (280,528 )  
Proceeds from sales of assets        74          37    
Acquisition of other property, plant and equipment        (194 )        (1,034 )  
Current period settlements of matured derivative contracts        106,151          103,858    
Net cash (used in) investing        (104,847 )        (177,667 )  
Cash flows from financing activities              
Proceeds from issuance of long-term debt        75,000          75,000    
Repayment under long-term debt        (42,000 )        (335,000 )  
Proceeds from senior notes                236,475    
Purchase of senior notes        (84,589 )          
Payment of debt issuance costs                (1,514 )  
Net distributions paid to JEH unitholders        (10,109 )          
Proceeds from sale of common stock        65,548          122,779    
Proceeds from sale of preferred stock        88,236            
Net cash provided by financing        92,086          97,740    
Net increase (decrease) in cash       2,148         9,132    
Cash              
Beginning of period        21,893          13,566    
End of period   $    24,041     $    22,698    
Supplemental disclosure of cash flow information              
Cash paid for interest   $    38,380     $    34,594    
Change in accrued additions to oil and gas properties        9,031          (94,552 )  
Asset retirement obligations incurred, including changes in estimate        6,785          1,370    
                       

Jones Energy, Inc.Selected Financial and Operating Statistics

The following table sets forth summary data regarding revenues, production volumes, average prices and average production costs associated with our sale of oil and natural gas for the periods indicated:
                                     
              Three Months Ended September 30,   Nine Months Ended September 30,  
                2016       2015     Change     2016       2015     Change  
Revenues (in thousands of dollars):                        
    Oil and gas sales $   32,582     $   46,499     $   (13,917 )   $   86,060     $   156,955     $   (70,895 )  
    Other revenues     771         653         118         2,295         2,210         85    
    Current period settlements of matured derivative contracts     27,538         39,273         (11,735 )       101,619         107,992         (6,373 )  
      Total revenues including derivative impact  $   60,891     $   86,425     $   (25,534 )   $   189,974     $   267,157     $   (77,183 )  
Net production volumes:                        
    Oil (MBbls)     396         630         (234 )       1,271         2,030         (759 )  
    Natural gas (MMcf)     4,602         6,069         (1,467 )       14,130         18,172         (4,042 )  
    NGLs (MBbls)     549         682         (133 )       1,633         1,946         (313 )  
      Total (MBoe)     1,712         2,324         (612 )       5,259         7,005         (1,746 )  
      Average net (Boe/d)     18,609         25,261         (6,652 )       19,193         25,659         (6,466 )  
Average sales price, unhedged:                        
    Oil (per Bbl), unhedged $   39.94     $   42.74     $   (2.80 )   $   35.59     $   46.10     $   (10.51 )  
    Natural gas (per Mcf), unhedged     2.08         1.95         0.13         1.50         2.03         (0.53 )  
    NGLs (per Bbl), unhedged     13.09         11.37         1.72         11.99         13.59         (1.60 )  
      Combined (per Boe), unhedged     19.03         20.01         (0.98 )       16.36         22.41         (6.05 )  
Average sales price, hedged:                        
    Oil (per Bbl), hedged $   87.34     $   78.64     $   8.70     $   86.26     $   75.19     $   11.07    
    Natural gas (per Mcf), hedged     3.46         3.24         0.22         3.51         3.37         0.14    
    NGLs (per Bbl), hedged     17.54         24.28         (6.74 )       17.40         26.21         (8.81 )  
      Combined (per Boe), hedged     35.12         36.91         (1.79 )       35.69         37.82         (2.13 )  
Average costs (per Boe):                        
    Lease operating $   4.59     $   3.82     $   0.77     $   4.57     $   4.70     $   (0.13 )  
    Production and ad valorem taxes     1.01         1.08         (0.07 )       0.96         1.33         (0.37 )  
    Depletion, depreciation and amortization     21.35         22.70         (1.35 )       22.14         22.29         (0.15 )  
    General and administrative     3.77         4.14         (0.37 )       4.20         3.94         0.26    
                                     

Jones Energy, Inc.Non-GAAP Financial Measures and Reconciliations

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.  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 our 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 and should not be viewed as a substitute for GAAP.  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:
                           
    Three Months Ended September 30,    Nine Months Ended September 30,   
(in thousands of dollars)   2016   2015   2016   2015  
Reconciliation of EBITDAX to net income                          
Net income (loss)   $    (22,429 )   $    34,842     $    (32,561 )   $    (10,642 )  
Interest expense        12,068          15,924          38,186          45,187    
Exploration expense        998          5,556          1,237          6,184    
Income taxes        (6,549 )        6,519          (8,234 )        (4,590 )  
Amortization of deferred financing costs        724          798          2,211          2,366    
Depreciation and depletion        36,550          52,766          116,449          156,151    
Accretion of ARO liability        323          210          913          610    
Reduction of TRA liability        (260 )                (422 )          
Other non-cash charges        116          418          1,227          1,178    
Stock compensation expense        2,185          2,039          5,269          5,287    
Deferred and other non-cash compensation expense        213          108          614          326    
Net (gain) loss on derivative contracts        (4,014 )        (90,483 )        18,769          (111,714 )  
Current period settlements of matured derivative contracts        27,538          39,273          101,619          107,992    
Amortization of deferred revenue        (587 )        (493 )        (1,828 )        (1,521 )  
(Gain) loss on sale of assets        (69 )        (16 )        (68 )        (10 )  
(Gain) on debt extinguishment                        (99,530 )          
Stand-by rig costs                                4,188    
Financing expenses and other loan fees        25          22          298          2,323    
EBITDAX   $    46,832     $    67,483     $    144,149     $    203,315    

Jones Energy, Inc. Non-GAAP Financial Measures and Reconciliations

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, non-cash compensation expense, and the other items described below.  We believe adjusted net income and adjusted earnings per share are useful to investors because they provide readers with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined.  However, these measures are 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.  The following table provides a reconciliation of net income (loss) as determined in accordance with GAAP to adjusted net income for the periods indicated:
                           
    Three Months Ended September 30,    Nine Months Ended September 30,   
(in thousands except per share data)   2016   2015   2016   2015  
Net income (loss)   $    (22,429 )   $    34,842     $    (32,561 )   $    (10,642 )  
Net (gain) loss on derivative contracts        (4,014 )        (90,483 )        18,769          (111,714 )  
Current period settlements of matured derivative contracts        27,538          39,273          101,619          107,992    
Exploration        998          5,556          1,237          6,184    
Non-cash stock compensation expense        2,185          2,039          5,269          5,287    
Deferred and other non-cash compensation expense        213          108          614          326    
(Gain) on debt extinguishment                        (99,530 )          
Stand-by rig costs                                4,188    
Financing expenses                                2,250    
Reduction of TRA liability        (260 )                (422 )          
Tax impact of adjusting items (1)        (5,374 )        7,039          (5,705 )        (2,233 )  
Change in valuation allowance        106                  498            
Adjusted net income (loss)        (1,037 )        (1,626 )        (10,212 )        1,638    
Adjusted net income (loss) attributable to non-controlling interests        (1,074 )        (828 )        (6,640 )        1,566    
Adjusted net income (loss) attributable to controlling interests        37          (798 )        (3,572 )        72    
Dividends and accretion on preferred stock        (765 )                (765 )          
Adjusted net income (loss) attributable to common shareholders   $    (728 )   $    (798 )   $    (4,337 )   $    72    
                           
Weighted average shares outstanding:                          
Basic        41,375          30,432          34,300          25,591    
Diluted        41,375          30,432          34,300          25,591    
                           
Adjusted earnings per share (basic and diluted)   $    (0.02 )   $    (0.03 )   $    (0.13 )   $    0.00    

(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.

Jones Energy, Inc. Non-GAAP Financial Measures and Reconciliations

Adjusted Earnings per Share 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 Earnings per Share as earnings per share plus that portion of the components of adjusted net income allocated to the controlling interests divided by weighted average shares outstanding.  We believe adjusted earnings per share 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, these measures are 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.  The following table provides a reconciliation of earnings per share to adjusted earnings per share for the period indicated:
                           
    Three Months Ended September 30,    Nine Months Ended September 30,   
(in thousands except per share data)   2016   2015   2016   2015  
Earnings per share (basic and diluted)   $    (0.26 )   $    0.44     $    (0.44 )   $    (0.12 )  
Net (gain) loss on derivative contracts        (0.06 )        (1.47 )        0.27          (1.89 )  
Current period settlements of matured derivative contracts        0.38          0.64          1.53          1.79    
Exploration        0.01          0.09          0.02          0.11    
Non-cash stock compensation expense        0.03          0.03          0.08          0.09    
Deferred and other non-cash compensation expense                        0.01          0.01    
(Gain) on debt extinguishment                        (1.43 )          
Stand-by rig costs                                0.06    
Financing expenses                                0.03    
Reduction of TRA liability                        (0.01 )          
Tax impact of adjusting items (1)        (0.12 )        0.24          (0.17 )        (0.08 )  
Change in valuation allowance                        0.01            
Adjusted earnings per share (basic and diluted)   $    (0.02 )   $    (0.03 )   $    (0.13 )   $    0.00    
                           
Weighted average shares outstanding:                          
Basic        41,375          30,432          34,300          25,591    
Diluted        41,375          30,432          34,300          25,591    
Effective tax rate on net income (loss) attributable to controlling interests        35.5 %        39.7 %        35.5 %        39.7 %  

(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.

 

Investor Contact:Robert Brooks, 512-328-2953Executive Vice President & CFOir@jonesenergy.com

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