Exhibit 99.1
 
Yuma Energy, Inc.

 
 
 
 
NEWS RELEASE
 
Yuma Energy, Inc. Announces it is Actively Seeking Strategic Alternatives,
Provides an update to its Liquidity and Operations,
and Reports First Quarter 2018 Financial Results
 
HOUSTON, TX – (PR Newswire – May 11, 2018) – Yuma Energy, Inc. (NYSE American: YUMA) (the “Company” or “Yuma”) today announced that it is actively seeking strategic alternatives and provided information related to its liquidity and operations. The Company also reported its financial results for the quarter ended March 31, 2018.
 
Strategic Alternatives
 
Yuma is currently exploring strategic alternatives in order to enhance and maximize shareholder value. These strategic alternatives may include, but are not limited to, a business combination, a merger, sale of assets, and possible capital market transactions. Yuma will thoroughly evaluate all opportunities and third-party proposals, if any, and will aggressively pursue options which are intended to add incremental shareholder value relative to its continued standalone activities.
 
Liquidity
 
Due to operating losses the Company sustained during recent quarters, which were partially a result of several events outside the reasonable control of the Company, including the suspension of production from several wells for a period of time and other associated factors, at March 31, 2018, the Company was not in compliance with its total debt to EBITDAX covenant for the trailing four quarter period under its credit facility. In addition, due to this non-compliance and the Company’s anticipated non-compliance at June 30, 2018, the Company classified its bank debt as a current liability in its consolidated financial statements as of and for the three months ended March 31, 2018. On May 8, 2018, the Company received a waiver from its lenders to its compliance with the fiscal period total debt to EBITDAX for the trailing four quarter period financial ratio covenant for the period ended March 31, 2018, as long as it does not exceed 3.75 to 1.00.
 
As of March 31, 2018, the Company had outstanding borrowings of $27.05 million under its credit facility, and its total borrowing base was $40.5 million, leaving $13.45 million of undrawn borrowing base. As of May 8, 2018, the total borrowing base under the credit facility was reduced to $35.0 million. Since March 31, 2018, the Company has borrowed an additional $7.2 million for working capital, leaving $750,000 of undrawn borrowing base as of the date hereof.
 
 
 
 
A breach in the future of any of the terms and conditions of the credit facility or a breach of the financial covenants thereunder could result in acceleration of the Company’s indebtedness, in which case the debt would become immediately due and payable. The Company currently anticipates non-compliance with various financial covenants at June 30, 2018.
 
The Company has initiated several strategic alternatives to remedy its limited liquidity, its debt covenant compliance issues, and to provide it with additional working capital to develop its existing assets. These may include, but are not limited to, reducing or eliminating capital expenditures previously planned for 2018; entering into commodity derivatives for a significant portion of its anticipated production for 2018; reducing general and administrative expenses; selling non-core assets; seeking merger and acquisition related opportunities; and potentially raising proceeds from capital markets transactions, including the sale of debt or equity securities. There can be no assurance that the exploration of strategic alternatives will result in a transaction.
 
The significant risks and uncertainties described above raise substantial doubt about the Company’s ability to continue as a going concern. The Company has prepared its consolidated financial statements for the three months ended March 31, 2018 on a going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. The Company’s consolidated financial statements for the three months ended March 31, 2018 do not include any adjustments that might result from the outcome of the going concern uncertainty.
 
Operations Update
 
In 2017, the Company entered the Permian Basin through a joint venture with two privately held energy companies and established an Area of Mutual Interest (“AMI”) covering approximately 33,280 acres in Yoakum County, Texas, located in the Northwest Shelf of the Permian Basin. The primary target within the AMI is the San Andres formation, which has been one of the largest producing formations in Texas to date. As of May 1, 2018, the Company held a 62.5% working interest in approximately 4,823 gross acres (3,014 net acres) within the AMI. In November, 2017, the Company spudded a salt water disposal well, the Jameson SWD #1. Upon completion of the salt water disposal well, the drilling rig was moved to the Company’s State 320 #1H horizontal San Andres well, which was subsequently drilled and completed. The Company opened the well on March 1, 2018 to begin the dewatering process and establish production. As of May 6, 2018, the well was producing 31 barrels of oil, 89 Mcf of natural gas, and 3,908 barrels of water per day. While significant water production is typical and was expected from the well, early production rates have not met management’s pre-drill expectations. The Company will continue to evaluate well performance and the commerciality of the prospect area, but given the well performance to date, the ability to establish commercial production in the prospect area is uncertain at this time.  As of March 31, 2018, the salt water disposal well and the State 320 #1H well were classified as unproved properties within the Company’s consolidated financial statements.
 
 
 
 
First Quarter 2018 Financial Results
 
Production
 
The following table presents the net quantities of oil, natural gas and natural gas liquids produced and sold by the Company for the three months ended March 31, 2018 and 2017, and the average sales price per unit sold.
 
 
 
Three Months Ended March 31,
 
 
 
2018
 
 
2017
 
Production volumes:
 
 
 
 
 
 
Crude oil and condensate (Bbls)
  47,157 
  76,397 
Natural gas (Mcf)
  633,440 
  899,427 
Natural gas liquids (Bbls)
  25,243 
  33,474 
Total (Boe) (1)
  177,973 
  259,776 
Average prices realized:
    
    
   Crude oil and condensate (per Bbl)
 $65.02 
 $49.95 
   Natural gas (per Mcf)
 $2.83 
 $2.84 
   Natural gas liquids (per Bbl)
 $31.22 
 $23.15 
 
(1) 
Barrels of oil equivalent have been calculated on the basis of six thousand cubic feet (Mcf) of natural gas equal to one barrel of oil equivalent (Boe).
 
Revenues
 
The following table presents the Company’s revenues for the three months ended March 31, 2018 and 2017.
 
  
 
Three Months Ended March 31,
 
 
 
2018
 
 
2017
 
Sales of natural gas and crude oil:
 
 
 
 
 
 
Crude oil and condensate
 $3,066,258 
 $3,815,932 
Natural gas
  1,791,251 
  2,553,443 
Natural gas liquids
  788,027 
  775,049 
Total revenues
 $5,645,536 
 $7,144,424 
 
Expenses
 
The Company’s lease operating expenses (“LOE”) and LOE per Boe for the three months ended March 31, 2018 and 2017, are set forth below:
 
 
 
Three Months Ended March 31,
 
 
 
2018
 
 
2017
 
Lease operating expenses
 $1,665,320 
 $1,697,908 
Severance, ad valorem taxes and marketing
  960,448 
  963,356 
     Total LOE
 $2,625,768 
 $2,661,264 
 
    
    
LOE per Boe
 $14.75 
 $10.24 
LOE per Boe without severance, ad valorem taxes and marketing
 $9.36 
 $6.54 
 
 
 
 
Commodity Derivative Instruments
 
Commodity derivative instruments open as of March 31, 2018 are provided below. Natural gas prices are NYMEX Henry Hub prices, and crude oil prices are NYMEX West Texas Intermediate.
 
 
 
2018
 
 
2019
 
 
 
Settlement
 
 
Settlement (1)
 
NATURAL GAS (MMBtu):
 
 
 
 
 
 
Swaps
 
 
 
 
 
 
Volume
  1,245,893 
  373,906 
Price
 $3.00 
 $3.00 
 
    
    
CRUDE OIL (Bbls):
    
    
Swaps
    
    
Volume
  140,818 
  156,320 
Price
 $53.17 
 $53.77 
 
(1) Represents volumes through March 2019.
 
About Yuma Energy, Inc.
 
Yuma Energy, Inc., a Delaware corporation, is an independent Houston-based exploration and production company focused on acquiring, developing and exploring for conventional and unconventional oil and natural gas resources. Historically, the Company’s operations have focused on onshore properties located in central and southern Louisiana and southeastern Texas where it has a long history of drilling, developing and producing both oil and natural gas assets. More recently, the Company has begun acquiring acreage in Yoakum County, Texas, with plans to explore and develop oil and natural gas assets in the Permian Basin. Finally, the Company has operated positions in Kern County, California, and non-operated positions in the East Texas Woodbine and the Bakken Shale in North Dakota. Its common stock is listed on the NYSE American under the trading symbol “YUMA.”
 
Forward-Looking Statements
 
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as “expects,” “believes,” “intends,” “anticipates,” “plans,” “estimates,” “potential,” “possible,” or “probable” or statements that certain actions, events or results “may,” “will,” “should,” or “could” be taken, occur or be achieved. The forward-looking statements include statements about future operations, and estimates of reserve and production volumes. Forward-looking statements are based on current expectations and assumptions and analyses made by the Company in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances. However, whether actual results and developments will conform with expectations is subject to a number of risks and uncertainties, including but not limited to: our limited liquidity; the risks of the oil and natural gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas); risks and uncertainties involving geology of oil and natural gas deposits; the uncertainty of reserve estimates; revisions to reserve estimates as a result of changes in commodity prices; the uncertainty of estimates and projections relating to future production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather; declines in oil and natural gas prices; inability of management to execute its plans to meet its goals, shortages of drilling equipment, oil field personnel and services, unavailability of gathering systems, pipelines and processing facilities and the possibility that government policies may change.  The Company’s annual report on Form 10-K for the year ended December 31, 2017, quarterly reports on Form 10-Q, recent current reports on Form 8-K, and other SEC filings discuss some of the important risk factors identified that may affect its business, results of operations, and financial condition. The Company undertakes no obligation to revise or update publicly any forward-looking statements, except as required by law.
 
For more information, please contact:
 
James J. Jacobs
Executive Vice President, Treasurer and Chief Financial Officer
Yuma Energy, Inc.
1177 West Loop South, Suite 1825
Houston, TX 77027
Telephone: (713) 968-7000
 
 
 
 
Yuma Energy, Inc.
 
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
Cash and cash equivalents
 $101,850 
 $137,363 
Accounts receivable, net of allowance for doubtful accounts:
    
    
Trade
  3,569,760 
  4,496,316 
Officer and employees
  - 
  53,979 
Other
  536,243 
  1,004,479 
Prepayments
  837,877 
  976,462 
Other deferred charges
  406,881 
  347,490 
 
    
    
Total current assets
  5,452,611 
  7,016,089 
 
    
    
OIL AND GAS PROPERTIES (full cost method):
    
    
Proved properties
  494,700,559 
  494,216,531 
Unproved properties - not subject to amortization
  9,127,056 
  6,794,372 
 
    
    
 
  503,827,615 
  501,010,903 
Less: accumulated depreciation, depletion and amortization
  (423,342,487)
  (421,165,400)
 
    
    
Net oil and gas properties
  80,485,128 
  79,845,503 
 
    
    
OTHER PROPERTY AND EQUIPMENT:
    
    
Land, buildings and improvements
  1,600,000 
  1,600,000 
Other property and equipment
  2,845,459 
  2,845,459 
 
  4,445,459 
  4,445,459 
Less: accumulated depreciation and amortization
  (1,449,769)
  (1,409,535)
 
    
    
Net other property and equipment
  2,995,690 
  3,035,924 
 
    
    
OTHER ASSETS AND DEFERRED CHARGES:
    
    
Deposits
  467,592 
  467,592 
Other noncurrent assets
  79,997 
  270,842 
 
    
    
Total other assets and deferred charges
  547,589 
  738,434 
 
    
    
TOTAL ASSETS
 $89,481,018 
 $90,635,950 
 
 
 
 
Yuma Energy, Inc.
 
CONSOLIDATED BALANCE SHEETS – CONTINUED
(Unaudited)
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
 
Current maturities of debt
 $27,424,499 
 $651,124 
Accounts payable, principally trade
  13,778,740 
  11,931,218 
Commodity derivative instruments
  1,476,071 
  903,003 
Asset retirement obligations
  88,721 
  277,355 
Other accrued liabilities
  1,765,817 
  2,295,438 
 
    
    
Total current liabilities
  44,533,848 
  16,058,138 
 
    
    
LONG-TERM DEBT
  - 
  27,700,000 
 
    
    
OTHER NONCURRENT LIABILITIES:
    
    
Asset retirement obligations
  10,352,150 
  10,189,058 
Commodity derivative instruments
  485,234 
  336,406 
Deferred rent
  281,852 
  290,566 
Employee stock awards
  239,095 
  191,110 
 
    
    
Total other noncurrent liabilities
  11,358,331 
  11,007,140 
 
    
    
COMMITMENTS AND CONTINGENCIES (Notes 2 and 15)
    
    
 
    
    
EQUITY
    
    
Series D convertible preferred stock
    
    
($0.001 par value, 7,000,000 authorized, 1,937,262 issued and outstanding
    
    
as of March 31, 2018, and 1,904,391 issued and outstanding as of
    
    
December 31, 2017)
  1,937 
  1,904 
Common stock
    
    
($0.001 par value, 100 million shares authorized, 23,230,169 outstanding as of
    
    
March 31, 2018 and 22,661,758 outstanding as of December 31, 2017)
  23,230 
  22,662 
Additional paid-in capital
  56,728,467 
  55,064,685 
Treasury stock at cost (369,238 shares as of March 31, 2018 and 13,343 shares
    
    
as of December 31, 2017)
  (434,557)
  (25,278)
Accumulated earnings (deficit)
  (22,730,238)
  (19,193,301)
 
    
    
Total equity
  33,588,839 
  35,870,672 
 
    
    
TOTAL LIABILITIES AND EQUITY
 $89,481,018 
 $90,635,950 
 
 
 
 
Yuma Energy, Inc.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
 
Three Months Ended March 31,
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
REVENUES:
 
 
 
 
 
 
Sales of natural gas and crude oil
 $5,645,536 
 $7,144,424 
 
    
    
EXPENSES:
    
    
Lease operating and production costs
  2,625,768 
  2,661,264 
General and administrative – stock-based compensation
  296,293 
  51,735 
General and administrative – other
  1,749,237 
  2,176,002 
Depreciation, depletion and amortization
  2,217,321 
  3,140,940 
Asset retirement obligation accretion expense
  142,940 
  138,569 
Bad debt expense
  65,808 
  - 
Total expenses
  7,097,367 
  8,168,510 
 
    
    
LOSS FROM OPERATIONS
  (1,451,831)
  (1,024,086)
 
    
    
OTHER INCOME (EXPENSE):
    
    
Net gains (losses) from commodity derivatives
  (1,251,260)
  3,556,783 
Interest expense
  (466,292)
  (496,091)
Gain on other property and equipment
  - 
  555,642 
Other, net
  (3,537)
  36,408 
Total other income (expense)
  (1,721,089)
  3,652,742 
 
    
    
INCOME (LOSS) BEFORE INCOME TAXES
  (3,172,920)
  2,628,656 
 
    
    
Income tax expense
  - 
  26,531 
 
    
    
NET INCOME (LOSS)
  (3,172,920)
  2,602,125 
 
    
    
PREFERRED STOCK:
    
    
Dividends paid in kind
  364,017 
  339,610 
 
    
    
NET INCOME (LOSS) ATTRIBUTABLE TO
    
    
COMMON STOCKHOLDERS
 $(3,536,937)
 $2,262,515 
 
    
    
INCOME (LOSS) PER COMMON SHARE:
    
    
Basic
 $(0.16)
 $0.19 
Diluted
 $(0.16)
 $0.16 
 
    
    
WEIGHTED AVERAGE NUMBER OF
    
    
COMMON SHARES OUTSTANDING:
    
    
Basic
  22,813,130 
  12,211,256 
Diluted
  22,813,130 
  14,056,170 
 
 
 
 
Yuma Energy, Inc.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
 
Three Months Ended March 31,
 
 
 
2018
 
 
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
Reconciliation of net income (loss) to net cash provided by (used in)
 
 
 
 
 
 
 operating activities:
 
 
 
 
 
 
Net income (loss)
 $(3,172,920)
 $2,602,125 
Depreciation, depletion and amortization of property and equipment
  2,217,321 
  3,140,940 
Amortization of debt issuance costs
  184,733 
  81,843 
Deferred rent liability, net
  33,117 
  - 
Stock-based compensation expense
  296,293 
  51,735 
Settlement of asset retirement obligations
  (147,122)
  - 
Asset retirement obligation accretion expense
  142,940 
  138,569 
Bad debt expense
  65,808 
  - 
Net (gains) losses from commodity derivatives
  1,251,260 
  (3,556,783)
Gain on sales of fixed assets
  - 
  (555,642)
Loss on write-off of liabilities net of assets
  3,631 
  - 
Changes in assets and liabilities:
    
    
(Increase) decrease in accounts receivable
  879,333 
  (795,740)
Decrease in prepaids, deposits and other assets
  138,585 
  306,021 
(Decrease) increase in accounts payable and other current and
    
    
non-current liabilities
  2,507,831 
  (461,542)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
  4,400,810 
  951,526 
 
    
    
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
Capital expenditures for oil and gas properties
  (3,507,005)
  (2,053,826)
Proceeds from sale of oil and gas properties
  1,000,000 
  641,056 
Derivative settlements
  (529,364)
  98,700 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
  (3,036,369)
  (1,314,070)
 
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
Proceeds from borrowings on senior credit facility
  6,350,000 
  - 
Repayment of borrowings on senior credit facility
  (7,000,000)
  - 
Repayments of borrowings - insurance financing
  (276,625)
  (255,026)
Debt issuance costs
  - 
  (76,452)
Shelf registration costs
  (64,050)
  - 
Treasury stock repurchases
  (409,279)
  (4,170)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
  (1,399,954)
  (335,648)
 
    
    
NET DECREASE IN CASH AND CASH EQUIVALENTS
  (35,513)
  (698,192)
 
    
    
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
  137,363 
  3,625,686 
 
    
    
CASH AND CASH EQUIVALENTS AT END OF PERIOD
 $101,850 
 $2,927,494 
 
    
    
Supplemental disclosure of cash flow information:
    
    
Interest payments (net of interest capitalized)
 $145,871 
 $264,542 
Interest capitalized
 $115,541 
 $44,550 
Supplemental disclosure of significant non-cash activity:
    
    
(Increase) decrease in capital expenditures financed by accounts payable
 $168,934 
 $(1,434,132)
 
 
 

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