Extraction Oil targets 1.5x debt ratio in 2018; liquidity is strong

By Devika Patel

Knoxville, Tenn., Feb. 28 – Extraction Oil & Gas, Inc. has strong liquidity and recently increased its borrowing base to $700 million, according to its chief financial officer.

The company is targeting a leverage ratio of 1.5x by the end of the year.

“Our liquidity and balance sheet remain strong,” chief financial officer Rusty Kelley said on the company’s fourth quarter and year ended Dec. 31 earnings conference call on Wednesday.

The company issued $750 million of notes in January and increased its borrowing base.

“During January, we issued $750 million of senior unsecured notes due in 2026 with a 5 5/8% coupon and increased our borrowing base to $700 million,” Kelley said.

Management is targeting a leverage ratio of 1.5x by the end of 2018.

“We continue to target a long-term run-rate of 1.5x net debt to EBITDAX [by the end of the year].

The company’s EBITDAX has grown at a rate that outpaces its incremental borrowings.

“Our EBITDAX continues to grow along with our production, outpacing any incremental borrowings,” Kelley said.

The company ended the fourth quarter with over $740 million of available liquidity and $435 million undrawn on its borrowing base.

On a run-rate basis, based on the company’s six months trailing EBITDAX annualized, the company had a net debt to EBITDAX ratio just above 2x at the end of 2017.

Extraction Oil & Gas is a Denver-based exploration and development company primarily focused on crude oil, natural gas and natural gas liquids in the Wattenberg field in the Denver-Julesburg basin of Colorado.

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