SRC Energy Inc. (SRCI) Issues Preliminary Q2 Results

SRC Energy Inc. (NYSE: SRCI), an oil and gas exploration and production company focused in the Denver-Julesburg Basin, today issues preliminary second quarter 2018 operating results, provides an operations and guidance update, and announces its second quarter 2018 earnings release and conference call dates.

Production and Average Realized Pricing Summary

Second quarter 2018 results were impacted by the lack of spare gas processing capacity, which resulted in persistently high line pressures and the inability to maintain consistent production flows. Further exacerbating the midstream constraints were above average temperatures in Colorado in June and continuing into July as well as unplanned shutdowns of natural gas processing facilities. As a result, many of SRC’s legacy wells could not be produced consistently, and the Company was unable to turn recently completed wells to sales as desired. While total barrels of oil equivalent (BOE) produced during the quarter met the Company's expectations, these midstream constraints resulted in oil as a percentage of total production declining to 43% in the second quarter. For the six-month period ended June 30, 2018, oil as a percentage of total production was just over 46%. As additional processing capacity becomes operational, the Company expects its existing completed and non-producing wells to be turned to sales and that oil percentages should improve. In addition, elevated line pressures temporarily drove operating costs on a unit basis higher in the second quarter of 2018 as the Company incurred incremental costs without the typical benefit of flush production from its new wells. The Company believes that lease operating expenses on a unit basis should return to an average of the first two quarters of 2018.

Operations Update and Capital Expenditures

During the quarter ended June 30, 2018, SRC drilled 31 gross (~27 net) wells and turned to sales 4 of the 12 gross (~11 net) wells on its Ag pad; however, production from these wells was intermittent due to high line pressures. The table below details current activity:

Drilling and completion capital expenditures for the quarter ended March 31, 2018 were approximately $121 million, almost all of which was funded by the Company's operating cash flows. In anticipation of the Mewbourn 3 plant opening in the third quarter of 2018, a second completion crew was added in June 2018.

GuidanceBased on actual results for the first two quarters of 2018, the Company maintains its full year 2018 guidance for production volume. However, product mix in terms of oil is trending toward the low end of the initial guidance range of 47% to 50% of the full-year 2018 production volume.

Management CommentLynn A. Peterson, Chairman and CEO of SRC Energy Inc. commented, "While this was a challenging quarter, we see light at the end of the tunnel and are excited for the balance of the year. Additional gas processing capacity in the DJ Basin is very close with the expansion of DCP Midstream’s Mewbourn 3 plant reaching mechanical completion. We also anticipate relief from high line pressures as compression has been added in coordination with that initial commissioning. During the second quarter, our team managed through significant operational challenges, and I’m very proud of what was accomplished under difficult circumstances."

Second Quarter 2018 Earnings Release and CallSRC plans to issue its second quarter earnings release on Wednesday, August 1, 2018 after the close of trading on the New York Stock Exchange. SRC will host a conference call on Thursday, August 2, 2018 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time) to discuss the results. The call will be conducted by Chairman and CEO Lynn A. Peterson, CFO James Henderson, Chief Development Officer Nick Spence, Chief Operations Officer Mike Eberhard and Manager of Investor Relations John Richardson. A Q&A session will immediately follow the discussion of the results for the quarter.

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