Facing “significant commodity price headwinds” in the third quarter, Approach Resources is standing by a decision to suspend drilling for the rest of the year.
The Fort Worth-based oil and gas company said Thursday that it lost $148.7 million in the third quarter, compared with $22.4 million profit a year earlier. Its adjusted net loss was $5.9 million, or 14 cents per diluted share.
Revenues totaled $33.9 million, but taking into account hedge gains, they were $46.7 million.
Approach, like other energy companies working in the Permian Basin, also reported an increase in production. Third-quarter output rose 17 percent over the prior-year quarter and 10 percent over the second quarter of this year.
CEO Ross Craft said the company had “another strong quarter” despite low oil prices and plans to “live within cash flow for at least the rest year” allowing it to take advantage of opportunities once prices improve.
Given the sustained uncertain commodity price outlook, we remain focused on reducing costs and making financially responsible capital allocation decisions.
Approach CEO Ross Craft
“Given the sustained uncertain commodity price outlook, we remain focused on reducing costs and making financially responsible capital allocation decisions as we preserve the strength of our balance sheet and liquidity,” Craft said.
Approach (ticker: AREX) dropped 10 cents, or 3.6 percent, on Thursday to close at $2.64.
Approach said earlier this year that it planned to suspend drilling, and Craft said Thursday that the company released its last rig in August. He said the company drilled four horizontal wells and completed five more and that as of the end of September had four more nearing completion.
Craft said the company is streamlining its operations and using the slowdown to perfect its drilling process for maximum savings. Approach has reduced its workforce by 25 percent, or 32 employees, which is projected to help save $5 million to $7 million beginning in 2016. Eleven of those employees worked in the Fort Worth office, and 21 in field offices.
Earlier this year, Approach cut its drilling budget by 59 percent. The company works primarily in the Wolfcamp Shale oil field in West Texas.
Because of the low commodity prices, Approach also had a one-time write-off of $220.2 million from its legacy vertical asset in the Ozona Northeast field, where it has no horizontal Wolfcamp locations. The company said it would have no impact on proven reserves.