01—Abstract
Summary
Summary of the 10-K filed February 24, 2021. Cited figures are marked; the original filing is the authoritative source.
Centennial Resource Development, Inc. is an independent oil and natural gas company focused on unconventional oil and liquids-rich natural gas in the Delaware Basin of the Permian Basin, with 81,657 net acres as of December 31, 2020, 97%a of which it operates.
The 2020 results were dominated by the COVID-19 demand shock and the Saudi-Russia price war. Oil and gas sales fell to $580.5 millionb from $944.3 million in 2019, a decrease of $363.9 million, or 39%. The company recognized a $591.8 million non-cash impairment of proved properties in the first quarter, bringing total impairment and abandonment expense to $691.2 million.
As a result, net loss attributable to Class A Common Stock was $682.8 millionc, or $(2.46) per share, compared with net income of $15.8 million in 2019. The company suspended drilling at the end of the first quarter of 2020 and ran no rigs from April until late September, then ended the year with two rigs in operation. Net production declined 11% to 24,581 MBoe, and proved reserves were 298,902 MBoe at year-end, roughly flat with 301,139 MBoe in 2019.
Proved undeveloped reserves made up 50% of total proved reserves. Pre-tax PV 10% fell to $1,189.1 milliond from $2,197.9 million. Cash provided by operating activities was $171.4 million, down from $564.2 million, and total 2020 capital expenditures were $254.8 million.
Liquidity rests on the revolving credit facility, which had a $700.0 million borrowing base and elected commitments, $330.0 million drawn, and $333.9 million of available capacity at year-end. In May 2020 the company completed a debt exchange that produced a $143.4 million gain and issued $127.1 million of 8.00% second lien senior secured notes due 2025.
Management expects its 2021 capital budget of $260 million to $310 million to be funded entirely from operating cash flow at current commodity prices. The company has no plans to pay dividends.
02—Key points
Key Highlights
- Oil and gas sales decreased $363.9 million, or 39%, to $580.5 million in 2020, with the average realized oil price falling 31% to $36.02 per Bbl.
- A $591.8 million non-cash impairment of proved properties in Q1 2020 drove total impairment and abandonment expense of $691.2 million and a net loss of $682.8 million, or $(2.46) per share.
- Drilling was suspended from the end of Q1 2020 until late Q3 2020, with 31 gross development wells completed in 2020 versus 84 in 2019. Two rigs were operating at year-end.
- Proved reserves were 298,902 MBoe at December 31, 2020, roughly flat with 301,139 MBoe a year earlier, and pre-tax PV 10% declined to $1,189.1 million from $2,197.9 million.
- Cash from operations fell to $171.4 million from $564.2 million, and the company was free cash flow positive in the second half of 2020, partially paying down credit facility borrowings.
- The May 2020 debt exchange produced a $143.4 million gain and replaced $254.2 million of senior unsecured notes with $127.1 million of 8.00% senior secured notes due 2025.
- Available borrowing capacity under the revolver was $333.9 million at year-end on a $700.0 million borrowing base, and the company was in compliance with its financial covenants.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 24, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $580.46M$944.33M | −38.5% |
| Operating Expenses | $1.36B$864.04M | +57.5% |
| Operating Income | -$780.12M$79.43M | −1082.2% |
| Interest Expense | $69.19M$55.99M | +23.6% |
| Net Income | -$685.20M$15.80M | −4437.3% |
| EPS (Basic) | $-2.46$0.06 | −4200.0% |
| EPS (Diluted) | $-2.46$0.06 | −4200.0% |
| Shares Outstanding (Basic) | 277.37M267.70M | +3.6% |
| Shares Outstanding (Diluted) | 277.37M276.63M | +0.3% |
05—Questions
Frequently Asked Questions
What caused the large 2020 net loss?
The loss was driven mainly by a $591.8 million non-cash impairment of proved properties recorded in the first quarter of 2020, when depressed NYMEX futures curves lowered estimated future cash flows. Total impairment and abandonment expense was $691.2 million, and the company also recorded a $64.5 million net loss on derivatives. These charges were partly offset by a $143.4 million gain on exchange of debt and an $85.1 million income tax benefit.
Does the company pay dividends, and how does it plan to fund its 2021 capital program?
The company has not paid cash dividends on its Common Stock to date and does not anticipate declaring any in the near future. It expects a 2021 capital budget of $260 million to $310 million, with $250 million to $290 million allocated to drilling, completion and facilities, and plans to fund it entirely from cash flows from operations given current commodity price levels.
How much debt does the company carry and when does it come due?
Total long-term debt was approximately $1.1 billion at December 31, 2020, including $330.0 million drawn on the credit facility maturing May 4, 2023, $127.1 million of 8.00% senior secured notes due June 1, 2025, $289.4 million of 5.375% senior notes due 2026, and $356.4 million of 6.875% senior notes due 2027. The company was in full compliance with its financial ratios and covenants at year-end.
Who controls the company's voting stock?
Riverstone and its affiliates beneficially owned approximately 33% of the company's voting common stock as of December 31, 2020. The filing notes that this stake gives Riverstone the ability to strongly influence corporate actions requiring stockholder approval.
06—Continue