Lilis Energy, Inc., an exploration and development company operating in the Permian Basin of West Texas and Southeastern New Mexico, today announced its 2018 fourth-quarter and full-year results and 2019 outlook and guidance.  The Company has provided a detailed presentation on its website.

Ronald D. Ormand, Chairman and Chief Executive Officer, commented, 
“Lilis demonstrated significant operational, and financial growth in 2018. We made significant progress on all of our strategic objectives set out for 2018, despite difficult market conditions. Production, notably oil, proved reserves and EBITDAX substantially increased.  More recently, we substantially improved and simplified our balance sheet with a transformative transaction which significantly reduces leverage and increases our liquidity position, while concurrently increasing our borrowing base to $125 million. We believe this transformative transaction positions the Company prudently to pursue our strategic goals, while allowing for patient and methodical development of our high-quality assets.”

“Our 2019 development plan prioritizes project-level rate of return, cash flow maximization, and allows for flexibility in capital spending based on changing market conditions. We are targeting cash flow neutrality in the second half of 2019 and production increases with reduced capex of almost 50% compared to 2018.  We expect to see continued increasing cost improvements as benefits from infrastructure, transportation agreements and capital efficiencies executed in 2018 are realized.”

“We are extremely pleased with our 2018 and 2019 year-to-date accomplishments. We are very confident in the value of our assets and the outlook of the Company,” concluded Mr. Ormand.

Continued Strong Performance and Growth

• Full-year 2018 average daily production increase of 215% over 2017, despite gas infrastructure challenges
• Oil, natural gas, and NGL sales revenue increased 225% in 2018 from 2017, to $70.2 million
• Reduced lease operating expenses (LOE) to $7.64 per Boe in 2018 from $10.14 per Boe in 2017, with continued improvement expected in 2019
• Full-year 2018 Adjusted EBITDAX of $35 million, up significantly over the prior year
• 2018 D&C capex in-line with Company guidance of $100 million
• F&D costs per Boe reduced to $6.22 per Boe
• Reduced G&A per Boe by 79%

Successful Execution of Operational Goals

• Spud 16 gross wells and completed 15 gross wells in the Wolfcamp A, B, XY, 2nd and 3rd Bone Spring; continuing the strategy of delineating and de-risking the acreage position both geographically and geologically
• Continue to drill some of the most prolific wells in the Permian’s Delaware Basin
• Infrastructure agreements executed in 2018 provide significant revenue enhancements, cost savings, access to crude pricing in the Gulf Coast markets in 2019, and more consistent production flowing to sales

Improved Liquidity and Access to Capital

• Successfully executed a new Senior Secured Revolving Credit Facility and partial conversion during 4Q18
• Reduced leverage through repayment of the Company’s previously existing $50 million First Lien Term Loan and partial conversion of its Second Lien Term Loan, in conjunction with the closing of the new revolving credit facility
• Obtained $52.5 million of non-dilutive capital from infrastructure transactions

Consistent Growth of Proved Reserves

• Year-end proved reserves were 42.7 MMBoe, representing a year-over-year increase of 273%
• Total proved PV-10 increased 367% in 2018 over 2017, to $328 million
• Liquids-rich proved reserves base, with crude oil representing approximately 82% of future reserve base projected revenues

Balance Sheet Recapitalization

• The Company completed a transformative transaction by converting the remaining Second Lien Loan with a claim value of approximately $133.6 million for a combination of preferred and common stock
• Reduced leverage and substantially improved the Company’s capital structure  
• Extinguished all dilutives linked to the second lien loan and the Series C & D preferred stock instruments, with a net reduction of 12 million shares
• Borrowing base redetermination process resulted in a borrowing base increase to $125 million, providing additional liquidity

2019 Outlook and Guidance

As a result of the recapitalization of the Company’s balance sheet, Lilis’ 2019 development plan affords the Company flexibility with respect to adjusting capital spending based on market conditions and the Company’s strategic plan. Currently, the 2019 D&C capital budget ranges from $50-$60 million and assumes a one-rig operated program, representing a D&C reduction of approximately 50% from 2018. In addition, the development plan provides for growth of production and cash flow utilizing one rig.

Management reacted decisively to market conditions and slowed down drilling and completions activity in late 2018.  The Company was able to delay capex, in part, due to the flexibility related to its vendor contracts. As a result, the Company has six DUC’s which are currently being completed. The Company has the ability to adjust capital expenditures in the second half of 2019 based on market conditions.

Management is targeting cash flow neutrality in the second half of 2019 and expects to see continued cost improvement as benefits from infrastructure and transportation agreements, executed in 2018, are realized throughout the year. The Company will continue to focus on trades and acquisitions that enhance its existing operated position and are otherwise accretive to bigger-picture strategic considerations. Projected capital expenditures do not include any acquisitions.

2019 Estimates:

• 2019 annual oil production of 4.2-4.6 MBbls/d
• Q1 2019 oil production of 3.4-3.6 MBbls/d
• Planned D&C capital expenditures to range from $50-$60 million
• Running a 1-rig operated program with the flexibility to increase as commodity prices and liquidity warrant
• Capex includes completion of 6 gross DUC wells (3.9 net) and 7 gross development plan wells (3.8 net), for a total of 13 gross (7.8 net) wells for the year
• Plan to place 10 gross (7.2) net wells on production during 2019
• Average lateral lengths to range from 1.5 mile to 2.0 miles
• Balance sheet flexibility provides the ability to flex to 2 rigs in the second half of 2019, with priority given to New Mexico block offsetting recent private company well results