10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File

Number: 001-40239

VINE ENERGY INC.

(Exact name of Registrant as specified in its charter)


Delaware		81-4833927
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

5800 Granite Parkway, Suite 550 Plano, Texas 75024		75024
(Address of principal executive offices)		(Zip Code)

(469)

606-0540

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	VEI	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in

Rule 12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock, $0.01 par value, as of May 14, 2021 was 41,040,721.

Table of Contents

Vine Energy Inc.

Table of Contents


Part I – Financial Information

Item 1.	Financial Statements (unaudited)	5

	Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020	5

	Consolidated Statements of Equity for the Three Months Ended March 31, 2021 and 2020	7

	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32

Item 4.	Controls and Procedures	33

Part II – Other Information

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

Signatures		37

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report on Form

10-Q

(this “Report”) includes “forward-looking statements.” All statements, other than statements of historical fact included in this Report, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under “Risk Factors” in Vine Energy Inc.’s Registration Statement filed pursuant to Rule 424(b)(4) on March 19, 2021 with the Securities and Exchange Commission. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

Forward-looking statements may include statements about:

•

our business strategy;

•

our reserves;

•

our financial strategy, liquidity and capital required for our development program;

•

our realized or expected natural gas prices;

•

our timing and amount of future production of natural gas;

•

our hedging strategy and results;

•

our future drilling plans and cost estimates;

•

our competition and government regulations;

•

our pending legal or environmental matters;

•

our ability to make business acquisitions;

•

the impact of

the COVID-19 pandemic

and its effect on our business and financial condition;

•

general economic conditions;

•

credit markets;

•

our future operating results; and

•

our future plans, objectives, expectations and intentions.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production and sale of natural gas. These risks include, but are not limited to, commodity price volatility, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating natural gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures, and the other risks described under “Risk Factors” Vine Energy Inc.’s Registration Statement filed pursuant to Rule 424(b)(4) on March 19, 2021 with the Securities and Exchange Commission.

Reserve engineering is a method of estimating underground accumulations of natural gas and oil that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of previous estimates. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of natural gas and oil that are ultimately recovered.

Table of Contents

Glossary of Oil and Natural Gas Terms

The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:

•

“Basin” refers to a geographic area containing specific geologic intervals;

•

“Btu” means one British thermal unit, the quantity of heat required to raise the temperature of a one pound mass of water by one degree Fahrenheit;

•

“CapEx” means capital expenditures;

•

“D&C” means drilling and completion costs;

•

“Estimated ultimate recovery” or “EUR” means the sum of reserves remaining as of a given date and cumulative production as of that date. As used in this Quarterly Report, EUR includes only proved reserves and is based on our reserve estimates;

•

“Field” means an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations;

•

“Formation” means a layer of rock which has distinct characteristics that differs from nearby rock;

•

“Henry Hub” means the distribution hub on the natural gas pipeline system in Erath, Louisiana, owned by Sabine Pipe Line LLC;

•

“Drilling locations” means total gross locations that may be able to be drilled on our existing acreage. A portion of our drilling locations constitute estimated locations based on our acreage and spacing assumptions;

•

“LNG” means liquified natural gas;

•

“Mcf” means one thousand cubic feet of natural gas;

•

“MMBtu” means one million Btu;

•

“MMBtud” means one MMBtu per day;

•

“MMcf” means one million cubic feet of natural gas;

•

“MMcfd” means one MMcf per day;

•

“NYMEX” means the New York Mercantile Exchange;

•

“Proved reserves” means the reserves which geological and engineering data demonstrate with reasonable certainty to be commercially recoverable in future years from known reservoirs under existing economic and operating conditions;

•

“Reservoir” means a porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock and is separate from other reservoirs;

•

“Spacing” means the distance between wells producing from the same reservoir. Spacing is often expressed in terms of acres

(e.g., 40-acre spacing)

and is often established by regulatory agencies;

•

“Unit” means the joining of all or substantially all interests in a specific reservoir or field, rather than a single tract, to provide for development and operation without regard to separate mineral interests. Also, the area covered by a unitization agreement;

•

“Wellbore” or “well” means a drilled hole that is equipped for natural gas production; and

•

“Working interest” means the right granted to the lessee of a property to explore for and to produce and own natural gas or other minerals. The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis.

Table of Contents

Names of Entities

•

“Blackstone” refers collectively, to investment funds affiliated with or managed by The Blackstone Group L.P.;

•

“Brix” refers to Brix Oil & Gas Holdings LP;

•

“Brix Companies” refers to Brix and Harvest on a combined basis as acquired by Vine Holdings prior to the initial public offering;

•

“Brix GP” refers to Brix Oil & Gas Holdings GP LLC;

•

“Brix Investment” refers to Brix Investment LLC;

•

“Brix Investment II” refers to Brix Investment II LLC;

•

“Harvest” refers to Harvest Royalties Holdings LP;

•

“Harvest GP” refers to Harvest Royalties Holdings GP LLC;

•

“Harvest Investment” refers to Harvest Investment LLC;

•

“Harvest Investment II” refers to Harvest Investment II LLC;

•

“Vine,” “Company,” “we,” “our,” “us” or like terms refers to Vine Energy Inc. individually and collectively with its subsidiaries, as the context requires;

•

“Vine Holdings” refers to Vine Energy Holdings LLC and its consolidated subsidiaries;

•

“Vine Investment” refers to Vine Investment LLC;

•

“Vine Investment II” refers to Vine Investment II LLC;

•

“Vine Oil & Gas”, “Predecessor” refers to Vine Oil & Gas Parent LP; and

•

“Vine Oil & Gas GP” refers to Vine Oil & Gas Parent GP LLC.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

VINE ENERGY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data - unaudited)


	For the Three Months Ended March 31,
Revenue:	2021			2020
Natural gas sales	$	153,986		$	92,543
Realized loss (gain) on commodity derivatives		(760	)		42,044
Unrealized loss on commodity derivatives		(35,103	)		(4,639	)

Total revenue		118,123			129,948

Operating Expenses:
Lease operating		14,960			12,995
Gathering and treating		20,601			16,382
Production and ad valorem taxes		3,982			4,149
General and administrative		2,583			3,331
Monitoring fee		2,077			1,738
Depletion, depreciation and accretion		97,072			82,324
Exploration		—			75
Strategic		—			562
Write-off of deferred Offering costs		—			5,787

Total operating expenses		141,275			127,343


Operating i ncome		(23,152	)		2,605

Interest Expense:
Interest		(29,792	)		(29,351	)
Loss on extinguishment of debt		(4,883	)		—

Total interest expense		(34,675	)		(29,351	)


Income before income taxes		(57,827	)		(26,746	)
Income tax provision		(165	)		(150	)

Net i ncome	$	(57,992	)	$	(26,896	)

Net income attributable to Predecessor	$	(28,939	)
Net income attributable to noncontrolling interest	$	(13,144	)
Net income attributable to Vine Energy Inc.	$	(15,909	)

Net income per share attributable to Vine Energy Inc.:
Basic	$	(3.95	)
Diluted	$	(3.95	)

Weighted average shares outstanding:
Basic		4,032,450
Diluted		4,032,450

The accompanying notes are integral to the financial statements.

Table of Contents

VINE ENERGY INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, expect share data – unaudited)


	March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	92,528		$	15,517
Accounts receivable		91,161			77,129
Joint interest billing receivables		17,625			18,280
Prepaid and other		1,417			3,626

Total current assets		202,731			114,552

Natural gas properties (successful efforts):
Proved		3,162,572			2,722,419
Unproved		89,993			—
Accumulated depletion		(1,475,582	)		(1,380,065	)

Total natural gas properties, net		1,776,983			1,342,354

Other property and equipment, net		8,828			7,936
Other		12,233			2,921


Total assets	$	2,000,775		$	1,467,763


Liabilities and Stockholders’ Equity / Partners’ Capital
Current liabilities:
Accounts payable	$	7,908		$	20,986
Accrued liabilities		141,468			90,004
Revenue payable		29,121			37,552
Derivatives		78,529			19,948

Total current liabilities		257,026			168,490

Long-term liabilities:
New RBL		28,000			—
Prior RBL		—			183,569
Second lien credit facility		143,664			142,947
Unsecured debt		899,435			898,225
Asset retirement obligations		23,467			21,889
TRA liability		6,985			—
Derivatives		31,447			38,341
Other		—			4,241

Total liabilities		1,390,024			1,457,702

Commitments and contingencies

Stockholders’ Equity / Partners’ Capital
Partners’ capital		—			10,061
Class A common stock, $0.01 par value, 350,000,000 shares authorized, 41,040,721 outstanding at March 31, 2021		410			—
Class B common stock, $0.01 par value, 150,000,000 shares authorized, 34,218,535 outstanding at March 31, 2021		342			—
Additional paid-in capital		348,406			—
Retained earnings		(15,909	)

Total stockholders’ equity attributable to Vine Energy Inc.		333,249			10,061
Noncontrolling interest		277,502			—

Total stockholders’ equity / partners’ capital		610,751			10,061


Total liabilities and stockholders’ equity / partners’ capital	$	2,000,775		$	1,467,763

The accompanying notes are integral to the financial statements.

Table of Contents

VINE ENERGY INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Amounts in thousands - unaudited)


			Class A Common Stock				Class B Common Stock									Total stockholders’ equity
	Partners’ Capital		Shares		Amount		Shares		Amount		APIC		Retained Earnings			attributable to Vine Energy Inc.			Noncontrolling Interest		Total stockholders’ equity / partners’ capital
Balance - December 31, 2019	$	462,517			$	—			$	—	$	—	$	(170,262	)	$	292,255			—	$	292,255
Net income attributable to Predecessor		—		—		—		—		—		—		(26,896	)		(26,896	)		—		(26,896	)

Balance - March 31, 2020	$

SEC Form 10-Q filed by Vine Energy Inc.