Lonestar Resources US Inc. (NASDAQ:LONE) Files An 8-K Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim ReviewItem 4.02(a) Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Report.
On October 23, 2018, the audit committee (the "Audit Committee") of the board of directors (the "Board") of Lonestar Resources US Inc. ("Lonestar" or the "Company") and senior management of the Company concluded that the consolidated financial statements included in the Company’s Annual Reports on Forms 10-K for the periods ended December 31, 2016 and 2017 (and the quarterly periods within those years), and Quarterly Reports on Forms 10-Q for the periods ended March 31, 2018, and June 30, 2018, should not be relied upon as a result of an error in the calculation of depreciation, depletion and amortization ("DD&A") expense included in Lonestar’s consolidated financial statements. The Company calculated its quarterly DD&A expense by using updated quarterly reserve estimates to recalculate DD&A expense looking back to the beginning of the applicable fiscal year instead of looking back to the beginning of the applicable quarterly period in accordance with the Securities and Exchange Commission's Accounting and Financial Reporting Interpretations and Guidance [March 31, 2001] paragraph [II] [F] [6]. This incorrect methodology resulted in the understatement of DD&A expense and the overstatement of oil and gas properties in like amounts, as well as the related income tax effects, in those consolidated financial statements.
The error had no impact on cash or total cash from operations. In addition, the calculations of EBITDAX for the years ended December 31, 2016 and 2017, and the first two quarters of 2018 remain unchanged as a result of the restatements set forth herein. The error had no material impact on the covenants and indemnifications for the Company's Senior Secured Credit Facility and 11.25% Senior Notes.
The Company intends to amend its Form 10-K for the year ended December 31, 2017, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018, as soon as reasonably practical. The tables below present the anticipated impacts to the Company's consolidated statements of operations (unaudited, in thousands, except per share data):
|
Year Ended |
||||||||||||
|
December 31, 2017 |
December 31, 2016 |
|||||||||||
|
As Reported |
Correction |
As Restated |
As Reported |
Correction |
As Restated |
|||||||
|
Depreciation, depletion and amortization |
$ |
52,718 |
$ |
4,100 |
$ |
56,818 |
$ |
46,888 |
$ |
5,107 |
$ |
51,995 |
|
Impairment of oil and gas properties |
33,413 |
33,413 |
33,893 |
1,677 |
35,570 |
|||||||
|
Loss attributable to common stockholders |
(42,631 |
) |
(4,822 |
) |
(47,453 |
) |
(94,335 |
) |
(4,365 |
) |
(98,700 |
) |
|
Basic and diluted earnings per share |
(1.92 |
) |
(0.21 |
) |
(2.13 |
) |
(11.64 |
) |
(0.53 |
) |
(12.17 |
) |
|
Three Months Ended |
|||||||||||||
|
March 31, 2018 |
June 30, 2018 |
||||||||||||
|
As Reported |
Correction |
As Restated |
As Reported |
Correction |
As Restated |
||||||||
|
Depreciation, depletion and amortization |
$ |
15,563 |
$ |
(138 |
) |
$ |
15,425 |
$ |
19,464 |
$ |
1,273 |
$ |
20,737 |
|
Loss attributable to common stockholders |
(18,541 |
) |
(18,425 |
) |
(20,707 |
) |
(2,818 |
) |
(23,525 |
) |
|||
|
Basic and diluted earnings per share |
(0.75 |
) |
(0.75 |
) |
(0.84 |
) |
(0.12 |
) |
(0.96 |
) |
|
Six Months Ended |
||||||
|
June 30, 2018 |
||||||
|
As Reported |
Correction |
As Restated |
||||
|
Depreciation, depletion and amortization |
$ |
35,027 |
$ |
1,135 |
$ |
36,162 |
|
Loss attributable to common stockholders |
(39,249 |
) |
(2,702 |
) |
(41,951 |
) |
|
Basic and diluted earnings per share |
(1.60 |
) |
(0.11 |
) |
(1.71 |
) |
The tables below present the anticipated impacts to the consolidated balance sheets (unaudited, in thousands):
|
December 31, 2017 |
December 31, 2016 |
|||||||||||||
|
As Reported |
Correction |
As Restated |
As Reported |
Correction |
As Restated |
|||||||||
|
Oil and gas properties, net |
$ |
571,163 |
$ |
(14,992 |
) |
$ |
556,171 |
$ |
439,228 |
$ |
(10,892 |
) |
$ |
428,336 |
|
Total assets |
606,800 |
(14,992 |
) |
591,808 |
459,109 |
(10,892 |
) |
448,217 |
||||||
|
Accumulated deficit |
(102,180 |
) |
(11,656 |
) |
(113,836 |
) |
(63,517 |
) |
(6,832 |
) |
(70,349 |
) |
||
|
Total equity |
215,346 |
(11,656 |
) |
203,690 |
166,395 |
(6,832 |
) |
159,563 |
|
March 31, 2018 |
June 30, 2018 |
|||||||||||||
|
As Reported |
Correction |
As Restated |
As Reported |
Correction |
As Restated |
|||||||||
|
Oil and gas properties, net |
$ |
604,485 |
$ |
(14,854 |
) |
$ |
589,631 |
$ |
633,880 |
$ |
(16,127 |
) |
$ |
617,753 |
|
Total assets |
624,518 |
(14,854 |
) |
609,664 |
656,723 |
(14,465 |
) |
642,258 |
||||||
|
Accumulated deficit |
(118,832 |
) |
(11,523 |
) |
(130,355 |
) |
(137,608 |
) |
(14,359 |
) |
(151,967 |
) |
||
|
Total equity |
198,300 |
(11,523 |
) |
186,777 |
179,516 |
(14,359 |
) |
165,157 |
The Company is assessing potential remedial actions relating to the Company's accounting controls and staffing, as well as additional procedures and process improvements, and plans to implement such remedial actions as soon as practicable.
The chairman of the Audit Committee of the Company's Board has discussed the foregoing matters with Lonestar’s independent registered public accounting firm, BDO USA, LLP, and with the remaining members of the Audit Committee.
