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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________________________________________
FORM 10-Q
______________________________________________________________________________________
(Mark One)
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
or
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-13283
RANGER OIL CORPORATION
(Exact name of registrant as specified in its charter)
| | | | | | | | |
| Virginia | | 23-1184320 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
16285 Park Ten Place, Suite 500
Houston, TX 77084
(Address of principal executive offices) (Zip Code)
(713) 722-6500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Class A Common Stock, $0.01 Par Value | | ROCC | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
| Large accelerated filer | ☐ | | Accelerated filer | ☒ |
| Non-accelerated filer | ☐ | | Smaller reporting company | ☒ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 28, 2022, there were 41,669,837 shares of common stock outstanding, including 19,120,839 shares of Class A Common Stock and 22,548,998 shares of Class B Common Stock.
RANGER OIL CORPORATION
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended September 30, 2022
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Revenues and other | | | | | | | |
| Crude oil | $ | 262,537 | | | $ | 127,995 | | | $ | 762,858 | | | $ | 326,222 | |
| Natural gas liquids | 18,669 | | | 7,165 | | | 54,227 | | | 15,115 | |
| Natural gas | 22,899 | | | 4,973 | | | 56,063 | | | 10,893 | |
| Other operating income, net | 985 | | | 928 | | | 2,888 | | | 2,085 | |
| Total revenues and other | 305,090 | | | 141,061 | | | 876,036 | | | 354,315 | |
| Operating expenses | | | | | | | |
| Lease operating | 24,123 | | | 10,647 | | | 61,133 | | | 29,200 | |
| Gathering, processing and transportation | 9,794 | | | 5,688 | | | 27,472 | | | 15,535 | |
| Production and ad valorem taxes | 16,698 | | | 7,534 | | | 46,612 | | | 19,768 | |
| General and administrative | 9,829 | | | 10,932 | | | 30,243 | | | 31,094 | |
| Depreciation, depletion and amortization | 66,204 | | | 30,975 | | | 171,387 | | | 83,654 | |
| Impairments of oil and gas properties | — | | | — | | | — | | | 1,811 | |
| Total operating expenses | 126,648 | | | 65,776 | | | 336,847 | | | 181,062 | |
| Operating income | 178,442 | | | 75,285 | | | 539,189 | | | 173,253 | |
| Other income (expense) | | | | | | | |
| Interest expense, net of amounts capitalized | (13,160) | | | (10,582) | | | (34,895) | | | (21,282) | |
| Gain (loss) on extinguishment of debt | — | | | — | | | 2,157 | | | (1,231) | |
| Derivative gains (losses) | 63,756 | | | (21,084) | | | (149,073) | | | (119,679) | |
| Other, net | 599 | | | (7) | | | 757 | | | (13) | |
| Income before income taxes | 229,637 | | | 43,612 | | | 358,135 | | | 31,048 | |
| Income tax expense | (2,052) | | | (549) | | | (3,171) | | | (410) | |
| Net income | 227,585 | | | 43,063 | | | 354,964 | | | 30,638 | |
| Net income attributable to Noncontrolling interest | (121,349) | | | (25,676) | | | (187,529) | | | (23,778) | |
| Net income attributable to common shareholders | $ | 106,236 | | | $ | 17,387 | | | $ | 167,435 | | | $ | 6,860 | |
| | | | | | | |
| Net income per share attributable to common shareholders: | | | | | | | |
| Basic | $ | 5.38 | | | $ | 1.13 | | | $ | 8.14 | | | $ | 0.45 | |
| Diluted | $ | 5.26 | | | $ | 1.11 | | | $ | 7.97 | | | $ | 0.44 | |
| | | | | | | |
| Weighted average shares outstanding – basic | 19,741 | | | 15,319 | | | 20,573 | | | 15,298 | |
| Weighted average shares outstanding – diluted | 20,341 | | | 15,713 | | | 21,155 | | | 15,669 | |
See accompanying notes to condensed consolidated financial statements.
RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – UNAUDITED
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Net income | $ | 227,585 | | | $ | 43,063 | | | $ | 354,964 | | | $ | 30,638 | |
| Other comprehensive income: | | | | | | | |
| Change in pension and postretirement obligations, net of tax | — | | | 1 | | | — | | | 4 | |
| Comprehensive income | 227,585 | | | 43,064 | | | 354,964 | | | 30,642 | |
| Net income attributable to Noncontrolling interest | (121,349) | | | (25,676) | | | (187,529) | | | (23,778) | |
| Other comprehensive income attributable to Noncontrolling interest | — | | | (1) | | | — | | | (4) | |
| Comprehensive income attributable to common shareholders | $ | 106,236 | | | $ | 17,387 | | | $ | 167,435 | | | $ | 6,860 | |
See accompanying notes to condensed consolidated financial statements.
RANGER OIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS – UNAUDITED
(in thousands, except share data)
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| Assets | | | |
| Current assets | | | |
| Cash and cash equivalents | $ | 20,344 | | | $ | 23,681 | |
| Accounts receivable, net of allowance for credit losses | 147,823 | | | 118,594 | |
| Derivative assets | 30,725 | | | 11,478 | |
| Prepaid and other current assets | 13,049 | | | 20,998 | |
| Assets held for sale | 1,186 | | | 11,400 | |
| Total current assets | 213,127 | | | 186,151 | |
| Property and equipment, net | 1,711,367 | | | 1,383,348 | |
| Derivative assets | 6,176 | | | 2,092 | |
| Other assets | 4,686 | | | 5,017 | |
| Total assets | $ | 1,935,356 | | | $ | 1,576,608 | |
| | | |
| Liabilities and Equity | | | |
| Current liabilities | | | |
| Accounts payable and accrued liabilities | $ | 264,364 | | | $ | 214,381 | |
| Derivative liabilities | 75,327 | | | 50,372 | |
| Current portion of long-term debt | 41 | | | 4,129 | |
| Total current liabilities | 339,732 | | | 268,882 | |
| | | |
| Deferred income taxes | 4,957 | | | 2,793 | |
| Derivative liabilities | 12,748 | | | 23,815 | |
| Other non-current liabilities | 9,930 | | | 10,358 | |
| Long-term debt, net | 603,457 | | | 601,252 | |
| | | |
Commitments and contingencies (Note 11) | | | |
| | | |
| Equity | | | |
Preferred stock of $0.01 par value – 5,000,000 shares authorized; none issued as of September 30, 2022 and December 31, 2021 | — | | | — | |
Class A common stock, $0.01 par value – 110,000,000 shares authorized; 19,422,156 and 21,090,259 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 194 | | | 729 | |
Class B common stock, $0.01 par value – 30,000,000 shares authorized; 22,548,998 shares issued and outstanding as of September 30, 2022 and December 31, 2021 | 2 | | | 2 | |
| Paid-in capital | 230,777 | | | 273,329 | |
| Retained earnings | 215,475 | | | 49,583 | |
| Accumulated other comprehensive loss | (111) | | | (111) | |
| Ranger Oil shareholders’ equity | 446,337 | | | 323,532 | |
| Noncontrolling interest | 518,195 | | | 345,976 | |
| Total equity | 964,532 | | | 669,508 | |
| Total liabilities and equity | $ | 1,935,356 | | | $ | 1,576,608 | |
See accompanying notes to condensed consolidated financial statements.
RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – UNAUDITED
(in thousands)
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2022 | | 2021 |
| Cash flows from operating activities | | | |
| Net income | $ | 354,964 | | | $ | 30,638 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| (Gain) loss on extinguishment of debt | (2,157) | | | 1,231 | |
| Depreciation, depletion and amortization | 171,387 | | | 83,654 | |
| Impairments of oil and gas properties | — | | | 1,811 | |
| Derivative contracts: | | | |
| Net losses | 149,073 | | | 119,679 | |
| Cash settlements and premiums paid, net | (159,224) | | | (46,041) | |
| Deferred income tax expense | 2,164 | | | 130 | |
| Non-cash interest expense | 2,441 | | | 1,742 | |
| Share-based compensation | 4,327 | | | 4,179 | |
| Other, net | (180) | | | 13 | |
| Changes in operating assets and liabilities, net | (33,613) | | | 7,671 | |
| Net cash provided by operating activities | 489,182 | | | 204,707 | |
| | | |
| Cash flows from investing activities | | | |
| Capital expenditures | (307,766) | | | (146,638) | |
| Acquisitions of oil and gas properties | (129,784) | | | — | |
| | | |
| Proceeds from sales of assets, net | 10,900 | | | 157 | |
| Net cash used in investing activities | (426,650) | | | (146,481) | |
| | | |
| Cash flows from financing activities | | | |
| Proceeds from credit facility borrowings | 483,000 | | | 20,000 | |
| Repayments of credit facility borrowings | (476,000) | | | (121,500) | |
| Repayments of second lien term loan | — | | | (56,890) | |
Proceeds from 9.25% Senior Notes due 2026, net of discount | — | | | 396,072 | |
| Repayments of acquired debt | (8,513) | | | — | |
| Payments for share repurchases | (59,414) | | | — | |
| Distributions to Noncontrolling interest | (1,691) | | | — | |
| Dividends paid | (1,492) | | | — | |
| Proceeds from redeemable common units | — | | | 151,160 | |
| Proceeds from redeemable preferred stock | — | | | 2 | |
| Transaction costs paid on behalf of Noncontrolling interest | — | | | (5,543) | |
| Issuance costs paid for Noncontrolling interest securities | — | | | (3,758) | |
| Withholding taxes for share-based compensation | (954) | | | (623) | |
| Debt issuance costs paid | (805) | | | (3,397) | |
| Net cash (used in) provided by financing activities | (65,869) | | | 375,523 | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (3,337) | | | 433,749 | |
| Cash, cash equivalents and restricted cash – beginning of period | 23,681 | | | 13,020 | |
| Cash, cash equivalents and restricted cash – end of period | $ | 20,344 | | | $ | 446,769 | |
| | | |
| Supplemental disclosures: | | | |
| Cash paid for: | | | |
| Interest, net of amounts capitalized | $ | 42,678 | | | $ | 14,298 | |
| Income taxes refunds, net | $ | — | | | $ | 360 | |
| | | |
| Non-cash investing and financing activities: | | | |
| Changes in property and equipment related to capital contributions | $ | — | | | $ | (38,561) | |
| Changes in accrued liabilities related to capital expenditures | $ | 55,008 | | | $ | 30,303 | |
See accompanying notes to condensed consolidated financial statements.
RANGER OIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY - UNAUDITED
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | | | | | | | | | | | | |
| Class A Common Shares Outstanding | | Class B Common Shares Outstanding | | Class A Common Stock | | Class B Common Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Noncontrolling interest | | Total Equity |
| Balance as of December 31, 2021 | 21,090 | | | 22,549 | | | $ | 729 | | | $ | 2 | | | $ | 273,329 | | | $ | 49,583 | | | $ | (111) | | | $ | 345,976 | | | $ | 669,508 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | (9,985) | | | — | | | (10,676) | | | (20,661) | |
| Common stock issued related to share-based compensation and other, net | 56 | | | — | | | — | | | — | | | 478 | | | — | | | — | | | — | | | 478 | |
| Balance as of March 31, 2022 | 21,146 | | | 22,549 | | | $ | 729 | | | $ | 2 | | | $ | 273,807 | | | $ | 39,598 | | | $ | (111) | | | $ | 335,300 | | | $ | 649,325 | |
| Net income | — | | | — | | | — | | | — | | | — | | | 71,184 | | | — | | | 76,856 | | | 148,040 | |
| Repurchase of Class A Common Stock | (681) | | | — | | | (7) | | | — | | | (25,052) | | | — | | | — | | | — | | | (25,059) | |
| Change in ownership, net | — | | | — | | | — | | | — | | | 6,498 | | | — | | | — | | | (6,498) | | | — | |
| Common stock issued related to share-based compensation and other, net | 18 | | | — | | | (517) | | | — | | | 2,362 | | | — | | | — | | | — | | | 1,845 | |
| Balance as of June 30, 2022 | 20,483 | | | 22,549 | | | $ | 205 | | | $ | 2 | | | $ | 257,615 | | | $ | 110,782 | | | $ | (111) | | | $ | 405,658 | | | $ | 774,151 | |
| Net income | — | | | — | | | — | | | — | | | — | | | 106,236 | | | — | | | 121,349 | | | 227,585 | |
| Repurchase of Class A Common Stock | (1,075) | | | — | | | (11) | | | — | | | (35,011) | | | — | | | — | | | — | | | (35,022) | |
| Change in ownership, net | — | | | — | | | — | | | — | | | 7,121 | | | — | | | — | | | (7,121) | | | — | |
| Distributions to Noncontrolling interest | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,691) | | | (1,691) | |
Dividends declared ($0.075 per share of Class A common stock) | — | | | — | | | — | | | — | | | — | | | (1,543) | | | — | | | — | | | (1,543) | |
| Common stock issued related to share-based compensation and other, net | 14 | | | — | | | — | | | — | | | 1,052 | | | — | | | — | | | — | | | 1,052 | |
| Balance as of September 30, 2022 | 19,422 | | | 22,549 | | | $ | 194 | | | $ | 2 | | | $ | 230,777 | | | $ | 215,475 | | | $ | (111) | | | $ | 518,195 | | | $ | 964,532 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Shares | | | | | | | | | | | | | | |
| Preferred Shares Outstanding | | Common Shares Outstanding | | Preferred Stock | | Common Stock | | Paid-in Capital | | Retained Earnings/(Accumulated Deficit) | | Accumulated Other Comprehensive Loss | | Noncontrolling interest | | Total Equity |
| Balance as of December 31, 2020 | — | | | 15,200 | | | $ | — | | | $ | 152 | | | $ | 203,463 | | | $ | 9,354 | | | $ | (131) | | | $ | — | | | $ | 212,838 | |
| Net loss | — | | | — | | | — | | | — | | | — | | | (13,572) | | | — | | | (6,449) | | | (20,021) | |
| Issuance of preferred stock | 225,490 | | | — | | | 2 | | | — | | | — | | | — | | | — | | | — | | | 2 | |
Issuance of Noncontrolling interest | — | | | — | | | — | | | — | | | (50,068) | | | — | | | — | | | 229,620 | | | 179,552 | |
| Common stock issued related to share-based compensation and other, net | — | | | 110 | | | — | | | 1 | | | 1,769 | | | — | | | 1 | | | 1 | | | 1,772 | |
| Balance as of March 31, 2021 | 225,490 | | | 15,310 | | | $ | 2 | | | $ | 153 | | | $ | 155,164 | | | $ | (4,218) | | | $ | (130) | | | $ | 223,172 | | | $ | 374,143 | |
| Net income | — | | | — | | | — | | | — | | | — | | | 3,045 | | | — | | | 4,551 | | | 7,596 | |
| Common stock issued related to share-based compensation and other, net | — | | | 2 | | | — | | | — | | | 922 | | | — | | | 1 | | | 1 | | | 924 | |
| Balance as of June 30, 2021 | 225,490 | | | 15,312 | | | $ | 2 | | | $ | 153 | | | $ | 156,086 | | | $ | (1,173) | | | $ | (129) | | | $ | 227,724 | | | $ | 382,663 | |
| Net income | — | | | — | | | — | | | — | | | — | | | 17,387 | | | — | | | 25,676 | | | 43,063 | |
| Common stock issued related to share-based compensation and other, net | — | | | 19 | | | — | | | — | | | 864 | | | — | | | (1) | | | 1 | | | 864 | |
| Balance as of September 30, 2021 | $ | 225,490 | | | $ | 15,331 | | | $ | 2 | | | $ | 153 | | | $ | 156,950 | | | $ | 16,214 | | | $ | (130) | | | $ | 253,401 | | | $ | 426,590 | |
_______________________
In October 2021, the Company effected a recapitalization, pursuant to which, among other things, the Company’s common stock was renamed and reclassified as Class A common stock, par value $0.01 per share (“Class A Common Stock”), a new class of capital stock of the Company, Class B Common Stock, par value $0.01 per share (“Class B Common Stock”) was authorized, and the designation of the Series A Preferred Stock was cancelled. See Note 12 in the notes to condensed consolidated financial statements for further details.
See accompanying notes to condensed consolidated financial statements.
RANGER OIL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
For the Quarterly Period Ended September 30, 2022
(in thousands, except per share amounts or where otherwise indicated)
Note 1 – Organization and Description of Business
Ranger Oil Corporation (together with its consolidated subsidiaries, unless the context otherwise requires, “Ranger Oil,” the “Company,” “we,” “us” or “our”) is an independent oil and gas company focused on the onshore development and production of oil, natural gas liquids (“NGLs”) and natural gas. Our current operations consist of drilling unconventional horizontal development wells and operating our producing wells in the Eagle Ford Shale (the “Eagle Ford”) in South Texas. We operate in and report our financial results and disclosures as one segment, which is the development and production of crude oil, NGLs and natural gas.
On January 15, 2021, the Company consummated the transactions (collectively, the “Juniper Transactions”) contemplated by: (i) the Contribution Agreement, dated November 2, 2020, by and among the Company, ROCC Energy Holdings, L.P. (formerly PV Energy Holdings, L.P., the “Partnership”) and JSTX Holdings, LLC (“JSTX”), an affiliate of Juniper Capital Advisors, L.P. (“Juniper Capital” and, together with JSTX and Rocky Creek Resources, LLC, “Juniper”); and (ii) the Contribution Agreement, dated November 2, 2020, by and among Rocky Creek Resources, LLC, an affiliate of Juniper Capital (“Rocky Creek”), the Company and the Partnership pursuant to which Juniper contributed $150 million in cash and certain oil and gas assets in South Texas in exchange for equity. See Note 2 for further discussion.
Note 2 – Basis of Presentation and Significant Accounting Policies
Basis of Presentation
Our unaudited condensed consolidated financial statements include the accounts of Ranger Oil and all of our subsidiaries as of the relevant dates. Intercompany balances and transactions have been eliminated. A substantial noncontrolling interest in our subsidiaries is provided for in our condensed consolidated statements of operations and comprehensive income and our condensed consolidated balance sheets for the periods presented. Our condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities Exchange Commission (the “SEC”). Preparation of these statements involves the use of estimates and judgments where appropriate. In the opinion of management, all adjustments considered necessary for a fair presentation of our condensed consolidated financial statements have been included. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Such reclassifications did not have a material impact on prior period financial statements. Our condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Annual Report”). Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full year.
Principles of Consolidation
In January 2021, Ranger Oil completed a reorganization into an Up-C structure with JSTX and Rocky Creek. Under the Up-C structure, Juniper owns all of the shares of the Company’s Class B Common Stock which are non-economic voting only shares of the Company. Juniper’s economic interest in the Company is held through its ownership of limited partner interests (the “Common Units”) in the Partnership. Pursuant to the amended and restated limited partnership agreement of the Partnership (the “Partnership Agreement”), the Company’s ownership of Common Units in the Partnership at all times equals the number of shares of the Company’s Class A Common Stock then outstanding, and Juniper’s ownership of Common Units in the Partnership at all times equals the number of shares of Class B Common Stock then outstanding. The Partnership was formed for the purpose of executing the Company’s reorganization with Juniper into an Up-C structure. The Partnership, through its subsidiaries, owns, operates, and manages oil and gas properties in Texas and manages the Company’s outstanding debt and derivative instruments. The Company’s wholly-owned subsidiary, ROCC Energy Holdings GP LLC (formerly, PV Energy Holdings GP, LLC, the “GP”), is the general partner of the Partnership. Subsidiaries of the Partnership own and operate all our oil and gas assets. Ranger Oil and the Partnership are holding companies with no other operations, material cash flows, or material assets or liabilities other than the equity interests in their subsidiaries.
The Common Units are redeemable (concurrently with the cancellation of an equivalent number of shares of Class B Common Stock) by Juniper at any time on a one-for-one basis in exchange for shares of Class A Common Stock or, if the Partnership elects, cash based on the 5-day average volume-weighted closing price for the Class A Common Stock immediately prior to the redemption. In determining whether to make a cash election, the Company would consider the interests of the holders of the Class A Common Stock, the Company’s financial condition, results of operations, earnings, projections, liquidity and capital requirements, management’s assessment of the intrinsic value of the Class A Common Stock, the trading price of the Class A Common Stock, legal requirements, covenant compliance, restrictions in the Company’s debt agreements and other factors it deems relevant.
The Partnership is considered a variable interest entity for which the Company is the primary beneficiary. The Company has benefits in the Partnership through the Common Units, and it has power over the activities most significant to the Partnership’s economic performance through its 100% controlling interest in the GP (which, accordingly, is acting as an agent on behalf of the Company). This conclusion was based on a qualitative analysis that considered the Partnership’s governance structure and the GP’s control over operations of the Partnership. The GP manages the business and affairs of the Partnership, including key Partnership decision-making, and the limited partners do not possess any substantive participating or kick-out rights that would allow Juniper to block or participate in certain operational and financial decisions that most significantly impact the Partnership’s economic performance or that would remove the GP. As such, because the Company has both power and benefits in the Partnership, the Company determined it is the primary beneficiary of the Partnership and consolidates the Partnership in the Company’s consolidated financial statements. The Company reflects a noncontrolling interest in the consolidated financial statements based on the proportion of Common Units owned by Juniper relative to the total number of Common Units outstanding. The noncontrolling interest is presented as a component of equity in the accompanying condensed consolidated financial statements and represents the ownership interest held by Juniper in the Partnership.
Noncontrolling Interest
The noncontrolling interest percentage may be affected by the issuance of shares of Class A Common Stock, repurchases or cancellation of Class A Common Stock, the exchange of Class B Common Stock and the redemption of Common Units (and concurrent cancellation of Class B Common Stock), among other things. The percentage is based on the proportionate number of Common Units held by Juniper relative to the total Common Units outstanding. As of September 30, 2022, the Company owned 19,422,156 Common Units, representing a 46.3% limited partner interest in the Partnership, and Juniper owned 22,548,998 Common Units, representing the remaining 53.7% limited partner interest. As of December 31, 2021, the Company owned 21,090,259 Common Units, representing a 48.3% limited partner interest in the Partnership, and Juniper owned 22,548,998 Common Units, representing the remaining 51.7% limited partner interest. During the three and nine months ended September 30, 2022, changes in the ownership interests were the result of share repurchases and issuances of Class A Common Stock in connection with the vesting of employees’ share-based compensation. See Note 12 for information regarding share repurchases and Note 13 for vesting of share-based compensation.
When the Company’s relative ownership interest in the Partnership changes, adjustments to Noncontrolling interest and Paid-in capital, tax effected, will occur. Because these changes in the ownership interest in the Partnership do not result in a change of control, the transactions are accounted for as equity transactions under Accounting Standards Codification Topic 810, Consolidation, which requires that any differences between the carrying value of the Company’s basis in the Partnership and the fair value of the consideration received are recognized directly in equity and attributed to the controlling interest. Additionally, based on the Partnership Agreement, there are no substantive profit sharing arrangements that would cause distributions to be other than pro rata. Therefore, profits and losses are attributed to the common shareholders and noncontrolling interest pro rata based on ownership interests in the Partnership.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents includes cash and highly liquid investments with original maturities of three months or less from the date of purchase. Restricted cash represents cash that is not readily available for general purpose cash needs. As of September 30, 2022 and December 31, 2021, the Company had no cash equivalents or restricted cash.
Of the $446.8 million in total cash, cash equivalents and restricted cash presented on the condensed consolidated statement of cash flows as of September 30, 2021, the Company had cash of $35.3 million, restricted cash – current of $15.4 million and restricted cash – non-current of $396.1 million. The restricted cash related to the net proceeds received from the offering of senior unsecured notes and certain additional funds that were held in escrow and subsequently released upon the acquisition of Lonestar Resources US Inc., a Delaware corporation (“Lonestar”). See Note 3 for additional information on this acquisition and Note 7 for additional information on the senior unsecured notes.
Significant Accounting Policies
The Company’s significant accounting policies are described in “Note 3 – Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in its 2021 Annual Report and are supplemented by the notes included in this Quarterly Report on Form 10-Q. The financial statements and related notes included in this report should be read in conjunction with the Company’s 2021 Annual Report.
Recent Accounting Pronouncements
We consider the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not listed below were assessed and determined to be not applicable.
Recently Issued Accounting Pronouncements Not Yet Adopted
In October 2021, the Financial Accounting Standards Board issued ASU 2021-08, Business Combinations (Topic 805): (“ASU 2021-08”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 amends Topic 805 to require the acquirer in a business combination to record contract assets and contract liabilities in accordance with Revenue from Contracts with Customers (Topic 606) at acquisition as if it had originated the contract, rather than at fair value. This update is effective for public companies beginning after December 15, 2022, with early adoption permitted. Adoption should be applied prospectively to business combinations occurring on or after the effective date of the amendments unless early adoption occurs during an interim period in which other application rules apply. We do not expect the adoption of this update to have a material impact to our financial statements.
Note 3 – Acquisitions and Dispositions
2022
Asset Acquisitions
In the second and third quarters of 2022, we completed acquisitions of additional working interests in Ranger-operated wells along with certain contiguous oil and gas producing assets and undeveloped acreage in the Eagle Ford shale. The aggregate cash consideration for these acquisitions was $129.8 million, subject to customary post-closing adjustments. These transactions were accounted for as asset acquisitions.
Asset Disposition
On July 22, 2022, we closed on the sale of the corporate office building and related assets acquired in connection with the Lonestar Acquisition that were classified as Assets held for sale on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021. Gross proceeds were $11.0 million with costs to sell of approximately $0.8 million and included the payoff of the related mortgage debt and accrued interest of $8.4 million for total net proceeds of $1.8 million. This transaction did not result in any material change to the purchase allocation further described below.
2021
Acquisition of Lonestar Resources
On October 5, 2021 (the “Closing Date”), the Company acquired Lonestar, as a result of which Lonestar and its subsidiaries became wholly-owned subsidiaries of the Company (the “Lonestar Acquisition”). The Lonestar Acquisition was effected pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated July 10, 2021, by and between the Company and Lonestar. In accordance with the terms of the Merger Agreement, Lonestar shareholders received 0.51 shares of the Company’s common stock for each share of Lonestar common stock held immediately prior to the effective time of the Lonestar Acquisition. Based on the closing price of the Company’s common stock on October 5, 2021 of $30.19, and in connection with the Lonestar Acquisition, the total value of the Company’s common stock issued to holders of Lonestar common stock, warrants and restricted stock units as applicable, was approximately $173.6 million.
The Lonestar Acquisition constituted a business combination and was accounted for using the acquisition method of accounting, with Ranger Oil being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities of Lonestar and its subsidiaries are recorded at their respective fair values as of the date of completion of the Lonestar Acquisition. The Company completed the purchase price allocation during the third quarter of 2022, and there were no material changes to the allocation presented in the 2021 Form 10-K.
We expensed $2.0 million in acquisition-related costs for the nine months ended September 30, 2022 related to employee severance and change-in-control compensation costs and other integration related costs.
Pro Forma Operating Results (Unaudited)
The following unaudited pro forma condensed financial data for the three months and nine months ended September 30, 2021 was derived from the historical financial statements of the Company giving effect to the Lonestar Acquisition, as if it had occurred on January 1, 2020.
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| Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 |
| Total revenues | $ | 200,995 | | | $ | 500,087 | |
| Net income (loss) attributable to common shareholders | $ | 12,531 | | | $ | (19,174) | |
Note 4 – Revenue Recognition
Revenue from Contracts with Customers
Crude oil. We sell our crude oil production to our customers at either the wellhead or a contractually agreed-upon delivery point, including certain regional central delivery point terminals or pipeline inter-connections. We recognize revenue when control transfers to the customer considering factors associated with custody, title, risk of loss and other contractual provisions as appropriate. Pricing is based on a market index with adjustments for product quality, location differentials and, if applicable, deductions for intermediate transportation. Costs incurred by us for gathering and transporting the products to an agreed-upon delivery point are recognized as a component of gathering, processing and transportation expense (“GPT”) in our condensed consolidated statements of operations.
NGLs. We have natural gas processing contracts in place with certain midstream processing vendors. We deliver “wet” natural gas to our midstream processing vendors at the inlet of their processing facilities through gathering lines, certain of which we own and others which are owned by gathering service providers. Subsequent to processing, NGLs are delivered or transported to a third-party customer. Depending upon the nature of the contractual arrangements with the midstream processing vendors regarding the marketing of the NGL products, we recognize revenue for NGL products on either a gross or net basis. For those contracts where we have determined that we are the principal, and the ultimate third party is our customer, we recognize revenue on a gross basis, with associated processing costs presented as GPT expenses. For those contracts where we have determined that we are the agent and the midstream processing vendor is our customer, we recognize NGL product revenues on a net basis with processing costs presented as a reduction of revenue.
Natural gas. Subsequent to the processing of “wet” natural gas and the separation of NGL products, the “dry” or residue gas is purchased by the processor or delivered to us at the tailgate of the midstream processing vendors’ facilities and sold to a third-party customer. We recognize revenue when control transfers to the customer considering factors associated with custody, title, risk of loss and other contractual provisions as appropriate. Pricing is based on a market index with adjustments for product quality and location differentials, as applicable. Costs incurred by us for gathering and transportation from the wellhead through the processing facilities are recognized as a component of GPT in our condensed consolidated statements of operations.
Performance obligations
We record revenue in the month that our oil and gas production is delivered to our customers. However, the collection of revenues from oil and gas production may take up to 60 days following the month of production. Therefore, we make accruals for revenues and accounts receivable based on estimates of our share of production sold. We record any differences, which historically have not been significant, between the actual amounts ultimately received and the original estimates in the period they become finalized.
We apply a practical expedient which provides for an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. Under our commodity product sales contracts, we bill our customers and recognize revenue when our performance obligations have been satisfied. At that time, we have determined that payment is unconditional. Accordingly, our commodity sales contracts do not create contract assets or liabilities.
Accounts Receivable from Contracts with Customers
Our accounts receivable consists mainly of trade receivables from commodity sales and joint interest billings due from partners on properties we operate. Our allowance for credit losses is entirely attributable to receivables from joint interest partners. We generally have the right to withhold future revenue distributions to recover past due receivables from joint interest owners. Our oil, natural gas, and NGL receivables are typically collected within 30 to 90 days. The following table summarizes our accounts receivable by type as of the dates presented:
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| | September 30, 2022 | | December 31, 2021 |
| Customers | $ | 123,493 | | | $ | 96,195 | |
| Joint interest partners | 22,964 | | | 21,755 | |
Derivative settlements from counterparties 1 | 1,619 | | | 1,037 | |
| Other | 99 | | | 18 | |
| Total | 148,175 | | | 119,005 | |
| Less: Allowance for credit losses | (352) | | | (411) | |
| Accounts receivable, net of allowance for credit losses | $ | 147,823 | | | $ | 118,594 | |
_______________________1 See Note 5 for information regarding our derivative instruments.
Note 5 – Derivative Instruments
We utilize derivative instruments, typically swaps, put options and call options which are placed with financial institutions that we believe are acceptable credit risks, to mitigate our financial exposure to commodity price volatility associated with anticipated sales of our future production and volatility in interest rates attributable to our variable rate debt instruments. Our derivative instruments are not designated as hedges for accounting purposes. While the use of derivative instruments limits the risk of adverse commodity price and interest rate movements, such use may also limit the beneficial impact of future product revenues and interest expense from favorable commodity price and interest rate movements. From time to time, we may enter into incremental derivative contracts in order to increase the notional volume of production we are hedging, restructure existing derivative contracts or enter into other derivative contracts resulting in modification to the terms of existing contracts. In accordance with our internal policies, we do not utilize derivative instruments for speculative purposes.
For our commodity derivatives, we typically combine swaps, purchased put options, purchased call options, sold put options and sold call options in order to achieve various hedging objectives. Certain of these objectives result in combinations that operate as collars which include purchased put options and sold call options, three-way collars, which include purchased put options, sold put options and sold call options, and enhanced swaps, which include either sold put options or sold call options with the associated premiums rolled into an enhanced fixed price swap, among others.
Commodity Derivatives 1
The following table sets forth our commodity derivative positions, presented on a net basis by period of maturity, as of September 30, 2022:
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| | 4Q2022 | | 1Q2023 | | 2Q2023 | | 3Q2023 | | 4Q2023 | | 1Q2024 | | 2Q2024 | | | | | | | | |
| NYMEX WTI Crude Swaps | | | | | | | | | | | | | | | | | | | | | | |
| Average Volume Per Day (bbl) | | 3,000 | | | 2,500 | | | 2,400 | | | 2,807 | | | 2,657 | | | 462 | | | 462 | | | | | | | | | |
| Weighted Average Swap Price ($/bbl) | | $ | 69.20 | | | $ | 54.40 | | | $ | 54.26 | | | $ | 54.92 | | | $ | 54.93 | | | $ | 58.75 | | | $ | 58.75 | | | | | | | | | |
| NYMEX WTI Crude Collars | | | | | | | | | | | | | | | | | | | | | | |
| Average Volume Per Day (bbl) | | 20,245 | | | 12,917 | | | 11,126 | | | 8,152 | | | 4,891 | | | | | | | | | | | | | |
| Weighted Average Purchased Put Price ($/bbl) | | $ | 64.56 | | | $ | 63.23 | | | $ | 61.48 | | | $ | 72.00 | | | $ | 70.00 | | | | | | | | | | | | | |
| Weighted Average Sold Call Price ($/bbl) | | $ | 88.78 | | | $ | 79.67 | | | $ | 74.31 | | | $ | 89.91 | | | $ | 86.04 | | | | | | | | | | | | | |
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| NYMEX WTI Crude CMA Roll Basis Swaps | | | | | | | | | | | | | | | | | | | | | | |
| Average Volume Per Day (bbl) | | 3,804 | | | | | | | | | | | | | | | | | | | | | |
| Weighted Average Swap Price ($/bbl) | | $ | 1.751 | | | | | | | | | | | | | | | | | | | | | |
| NYMEX HH Swaps | | | | | | | | | | | | | | | | | | | | | | |
| Average Volume Per Day (MMBtu) | | 12,500 | | | 10,000 | | | 7,500 | | | | | | | | | | | | | | | | | |
| Weighted Average Swap Price ($/MMBtu) | | $ | 3.793 | | | $ | 3.620 | | | $ | 3.690 | | | | | | | | | | | | | | | | | |
| NYMEX HH Collars | | | | | | | | | | | | | | | | | | | | | | |
| Average Volume Per Day (MMBtu) | | 14,511 | | | 14,617 | | | 11,538 | | | 11,413 | | | 11,413 | | | 11,538 | | | 11,538 | | | | | | | | | |
| Weighted Average Purchased Put Price ($/MMBtu) | | $ | 2.854 | | | $ | 6.561 | | | $ | 2.500 | | | $ | 2.500 | | | $ | 2.500 | | | $ | 2.500 | | | $ | 2.328 | | | | | | | | | |
| Weighted Average Sold Call Price ($/MMBtu) | | $ | 3.791 | | | $ | 12.334 | | | $ | 2.682 | | | $ | 2.682 | | | $ | 2.682 | | | $ | 3.650 | | | $ | 3.000 | | | | | | | | | |
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| OPIS Mt. Belv Ethane Swaps | | | | | | | | | | | | | | | | | | | | | | |
| Average Volume per Day (gal) | | 27,717 | | | | | 98,901 | | | 34,239 | | | 34,239 | | | 34,615 | | | | | | | | | | | |
| Weighted Average Fixed Price ($/gal) | | $ | 0.2500 | | | | | $ | 0.2288 | | | $ | 0.2275 | | | $ | 0.2275 | | | $ | 0.2275 | | | | | | | | | | | |
_______________________
1 NYMEX WTI refers to New York Mercantile Exchange West Texas Intermediate that serves as the benchmark for crude oil. NYMEX HH refers to NYMEX Henry Hub that serves as the benchmark for natural gas. OPIS Mt. Belv refers to Oil Price Information Service Mt. Belvieu that serves as the benchmark for ethane which represents a commodity proxy for NGLs.
Interest Rate Derivatives
Through May 2022, we had a series of interest rate swap contracts (the “Interest Rate Swaps”) establishing fixed interest rates on a portion of our variable interest rate indebtedness. The notional amount of the Interest Rate Swaps totaled $300 million, with us paying a weighted average fixed rate of 1.36% on the notional amount, and the counterparties paying a variable rate equal to LIBOR. As of September 30, 2022, we did not have any interest rate derivatives.
Financial Statement Impact of Derivatives
The impact of our derivative activities on income is included within Derivatives on our condensed consolidated statements of operations. Derivative contracts that have expired at the end of a period, but for which cash had not been received or paid as of the balance sheet date, have been recognized as components of Accounts receivable (see Note 4) and Accounts payable and accrued liabilities (see Note 9) on the condensed consolidated balance sheets. Adjustments to reconcile net income to net cash provided by operating activities include derivative losses and cash settlements that are reported under Net losses and Cash settlements and premiums paid, net, on our condensed consolidated statements of cash flows, respectively.
The following table summarizes the effects of our derivative activities for the periods presented:
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Interest Rate Swap gains (losses) recognized in the condensed consolidated statements of operations | $ | — | | | $ | (84) | | | $ | 64 | | | $ | (48) | |
| Commodity gains (losses) recognized in the condensed consolidated statements of operations | 63,756 | | | (21,000) | | | (149,137) | | | (119,631) | |
| $ | 63,756 | | | $ | (21,084) | | | $ | (149,073) | | | $ | (119,679) | |
| | | | | | | |
| Interest rate cash settlements recognized in the condensed consolidated statements of cash flows | $ | — | | | $ | (973) | | | $ | (1,415) | | | $ | (2,851) | |
| Commodity cash settlements and premiums paid recognized in the condensed consolidated statements of cash flows | (55,302) | | | (21,265) | | | (157,809) | | | (43,190) | |
| $ | (55,302) | | | $ | (22,238) | | | $ | (159,224) | | | $ | (46,041) | |
The following table summarizes the fair values of our derivative instruments, which we elect to present on a gross basis, as well as the locations of these instruments on our condensed consolidated balance sheets as of the dates presented:
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| | | | Fair Values |
| | | | | September 30, 2022 | | December 31, 2021 |
| | | | | Derivative | | Derivative | | Derivative | | Derivative |
| Type | | Balance Sheet Location | | Assets | | Liabilities | | Assets | | Liabilities |
| Interest rate contracts | | Derivative assets/liabilities – current | | $ | — | | | $ | — | | | $ | — | | | $ | 1,480 | |
| Commodity contracts | | Derivative assets/liabilities – current | | 30,725 | | | 75,327 | | | 11,478 | | | 48,892 | |
| Interest rate contracts | | Derivative assets/liabilities – non-current | | — | | | — | | | — | | | — | |
| Commodity contracts | | Derivative assets/liabilities – non-current | | 6,176 | | | 12,748 | | | 2,092 | | | 23,815 |
