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Synergy Resources Reports Fiscal Third Quarter 2014 Results

Revenues up 108% to $25.7 Million, Driving Operating Income up 131% to $11.3 Million and Net Income of $0.09 per Share; Company to Host Earnings Conference Call Today, July 9th, 2014 at 12:00 p.m. ET 877-407-9122 Toll Free Dial-In, 201-493-6747 Internatio

PLATTEVILLE, CO--(Marketwired - July 09, 2014) - Synergy Resources Corporation (NYSE MKT: SYRG), a U.S. oil and gas exploration and production company focused in the Denver-Julesburg Basin, reported its fiscal third quarter results for the period ended May 31st, 2014.

Third Quarter 2014 Financial Highlights vs. Same Year-Ago Quarter

  • Revenues increased 108% to $25.7 million
  • Operating income increased 131% to $11.3 million
  • Adjusted EBITDA (a non-GAAP metric) increased 103% to $18.9 million representing a 74% margin on revenues
  • At May 31st, 2014, cash and equivalents totaled $48 million
  • Re-determined borrowing base of $110 million yields additional liquidity of $73 million

Third Quarter 2014 Operational Highlights

  • Net oil and natural gas production increased to 379,081 barrels of oil equivalent (BOE), averaging 4,120 BOE per day versus 2,256, as compared to the same year ago quarter, an average daily increase of 83%
  • As operator, completed 5 horizontal wells on our Phelps pad and commenced production in May
  • As of May 31st , 2014, the company was the operator of 16 producing horizontal wells in the Wattenberg Field

Third Quarter 2014 Financial Results

Revenues totaled $25.7 million, up 11% from $23 million in the previous quarter and up 108% from $12.3 million in the year ago quarter. The year-over-year improvement was attributed to an 83% increase in production, primarily from the new horizontal wells brought on line and a 14% increase in the realized average selling price per BOE. During fiscal Q3 2014, average selling prices were $90.91 per barrel of oil and $5.15 per mcf of gas, as compared to $83.98 and $4.76, respectively a year-ago.

Operating income increased to $11.3 million up 19% from $9.5 million in the previous quarter and up 131% from $4.9 million in the same year-ago period. Net income was $7.2 million or $0.09 per basic and diluted share, up from $5.2 million or $0.07 per basic and diluted share in the previous quarter and up 98% from $3.6 million or $0.07 per basic and $0.06 per diluted share in the same year-ago period. 

Adjusted EBITDA (a non-GAAP financial measure) increased to $18.9 million, up 9% from $17.5 million in the previous quarter and up 103% from $9.3 million in the same year-ago quarter.

As of May 31st, 2014, the company's cash and equivalents and short term instruments totaled $48 million, as compared to $79.5 million at August 31, 2013. At May 31st 2014, there was $37 million borrowed under the revolving line of credit.

The following tables present certain per unit metrics that compare results of the corresponding quarterly reporting periods:

                                                                            
                                                                            
                                          Three Months Ended May 31,        
                                         ---------------------------        
                                              2014          2013     Change 
                                         ------------- ------------- ------ 
Production:                                                                 
  Oil (Bbls)                                   232,571       115,225    102%
  Gas (Mcf)                                    879,062       553,909     59%
  BOE                                          379,081       207,543     83%
                                                                            
Revenues (in thousands):                                                    
  Oil                                    $      21,143 $       9,677    118%
  Gas                                            4,529         2,637     72%
                                         ------------- -------------        
    Total                                $      25,672 $      12,314    108%
                                         ============= =============        
                                                                            
Average realized price:                                                     
  Oil                                    $       90.91 $       83.98      8%
  Gas                                    $        5.15 $        4.76      8%
  BOE                                    $       67.72 $       59.33     14%
                                                                            
                                                                            

"Bbl" refers to one stock tank barrel, or 42 U.S. gallons liquid volume in reference to crude oil or other liquid hydrocarbons. "Mcf" refers to one thousand cubic feet. A BOE (i.e. barrel of oil equivalent) combines Bbls of oil and Mcf of gas by converting each six Mcf of gas to one Bbl of oil. 

The following table summarizes operating costs on a per unit basis. Additional details regarding operating costs can be found in the condensed financial statements. 

                                                                            
                                                                            
Costs per BOE                                    Three Months Ended May 31, 
                                               -----------------------------
                                                    2014           2013     
                                               -------------- --------------
                                                                            
Lease operating expenses                       $         6.07 $         5.05
Production taxes                               $         6.27 $         5.14
DDA                                            $        20.57 $        18.41
General and administrative                     $         5.11 $         7.29
                                               -------------- --------------
  Total                                        $        38.02 $        35.89
                                               ============== ==============
                                                                            
                                                                            

Conference Call

The company will hold a conference call on Wednesday July 9th, 2014 at 12:00 p.m. Eastern time to discuss results for its fiscal third quarter ended May 31st, 2014.

Synergy Resources co-CEO Ed Holloway, co-CEO William Scaff, Jr., CFO Monty Jennings, and COO Craig Rasmuson will host the presentation, followed by a question and answer period.

Date: Wednesday July 9th, 2014
Time: 12:00 p.m. Eastern time (10:00 a.m. Mountain time)

877-407-9122 Toll Free Dial-In (US & Canada)
201-493-6747 International/Local Dial-In

The conference call will be webcast simultaneously which you can access via this link: http://syrginfo.equisolvewebcast.com/q3-2014 and via the investor section of the company's web site at www.syrginfo.com.

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, contact Jon Kruljac with Synergy Resources at 970-737-1073. A replay of the call will be available after 3:00 p.m. Eastern time on the same day and until July 23rd, 2014.

Replay Dial-In Numbers
877-660-6853 Toll Free (US & Canada)
201-612-7415 International/Local
Replay ID#411931

About Synergy Resources Corporation

Synergy Resources Corporation is a domestic oil and natural gas exploration and production company. Synergy's core area of operations is in the Denver-Julesburg Basin, which encompasses Colorado, Wyoming, Kansas, and Nebraska. The Wattenberg field in the D-J Basin ranks as one of the most productive fields in the U.S. The company's corporate offices are located in Platteville, Colorado. More company news and information about Synergy Resources is available at www.syrginfo.com.

Important Cautions Regarding Forward Looking Statements

This press release may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "believes", "expects", "anticipates", "intends", "plans", "estimates", "should", "likely" or similar expressions, indicates a forward-looking statement. These statements are subject to risk and uncertainties and are based on the beliefs and assumptions of management, and information currently available to management. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. The identification in this press release of factors that may affect the company's future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Factors that could cause the company's actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: the success of the company's exploration and development efforts; the price of oil and gas; worldwide economic situation; change in interest rates or inflation; willingness and ability of third parties to honor their contractual commitments; the company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the oil and gas industry for risk capital; the company's capital costs, which may be affected by delays or cost overruns; costs of production; environmental and other regulations, as the same presently exist or may later be amended; the company's ability to identify, finance and integrate any future acquisitions; and the volatility of the company's stock price.

About Non-GAAP Financial Measures

The company uses "adjusted EBITDA," as a non-GAAP financial measure to evaluate financial performance such as period-to-period comparisons. This Non-GAAP measure is not defined under U.S. GAAP and should be considered in addition to, not as a substitute for, indicators of financial performance reported in accordance with U.S. GAAP. The company may use non-GAAP measures that are not comparable to measures with similar titles reported by other companies. Also, in the future, the company may disclose different non-GAAP financial measures in order to help investors more meaningfully evaluate and compare the company's future results of operations to its previously reported results. The company encourages investors to review its financial statements and publicly-filed reports in their entirety and not rely on any single financial measure. The section titled "Reconciliation of Non-GAAP Financial Measures" includes a detailed description of this measure as well as reconciling to its most similar U.S. GAAP measure.

Reconciliation of Non-GAAP Financial Measures

The company defines adjusted EBITDA as net income adjusted to exclude the impact of interest expense, interest income, income taxes, depreciation, depletion and amortization, stock based compensation, and the plus or minus change in fair value of derivative assets or liabilities. The company believes adjusted EBITDA is relevant because it is a measure of cash flow available to fund capital expenditures and service debt and is a metric used by some industry analysts to provide a comparison of its results with its peers. The following table presents a reconciliation of the company's non-GAAP financial measures to the nearest GAAP measure.

                                                                            
                                                                            
                       SYNERGY RESOURCES CORPORATION                        
               RECONCILIATION OF NON-GAAP FINANCIAL MEASURES                
                         (unaudited, in thousands)                          
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                 --------------------  -------------------- 
                                  May 31,    May 31,    May 31,    May 31,  
ADJUSTED EBITDA                     2014       2013       2014       2013   
                                 ---------  ---------  ---------  --------- 
                                                                            
Net income                       $   7,160  $   3,615  $  18,421  $   8,585 
                                                                            
  Depreciation, depletion, and                                              
   amortization                      7,796      3,820     21,106      9,316 
  Income tax expense                 3,116      1,701      8,841      4,620 
  Stock based compensation             702        611      1,569        994 
  Change in fair value -                                                    
   derivatives                         179       (502)      (652)      (368)
  Interest Expense                       -         94          -         94 
  Interest income                      (22)        (5)       (70)       (20)
                                 ---------  ---------  ---------  --------- 
    Adjusted EBITDA              $  18,931  $   9,334  $  49,215  $  23,221 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            

Financial Statements
Condensed financial statements are included below. Additional financial information, including footnotes that are considered an integral part of the financial statements, will be included in Synergy's Edgar Filings at www.sec.gov on Form10-Q for the period ended May 31, 2014.

                                                                            
                                                                            
                        SYNERGY RESOURCES CORPORATION                       
                          CONDENSED BALANCE SHEETS                          
                          (unaudited, in thousands)                         
                                                                            
                                                                            
                                                       May 31,    August 31,
                                                         2014        2013   
                                                     ----------- -----------
                       ASSETS                                               
Cash and short term investments                      $    47,979 $    79,481
Other current assets                                      24,128      12,494
                                                     ----------- -----------
  Total current assets                                    72,107      91,975
                                                     ----------- -----------
Oil and gas properties and other equipment               322,859     197,965
Other assets                                                 595       1,296
                                                     ----------- -----------
    Total assets                                     $   395,561 $   291,236
                                                     =========== ===========
                                                                            
        LIABILITIES AND SHAREHOLDERS' EQUITY                                
Current liabilities                                  $    69,724      41,367
Revolving credit facility                                 37,000      37,000
Asset retirement obligations                               4,144       2,777
Commodity derivative                                       1,714         334
Deferred tax liability, net                               15,379       6,538
                                                     ----------- -----------
  Total liabilities                                      127,961      88,016
                                                     ----------- -----------
Shareholders' equity:                                                       
  Common stock and paid-in capital                       262,413     216,454
  Retained earnings (accumulated deficit)                  5,187    (13,234)
                                                     ----------- -----------
    Total shareholders' equity                           267,600     203,220
                                                     ----------- -----------
      Total liabilities and shareholders' equity     $   395,561 $   291,236
                                                     =========== ===========
                                                                            
                                                                            
                                                                            
                                                                            
                       SYNERGY RESOURCES CORPORATION                        
                     CONDENSED STATEMENTS OF OPERATIONS                     
         (unaudited, in thousands, except share and per share data)         
                                                                            
                            Three Months Ended         Nine Months Ended    
                         ------------------------  ------------------------ 
                           May 31,      May 31,      May 31,      May 31,   
                             2014         2013         2014         2013    
                         -----------  -----------  -----------  ----------- 
                                                                            
Oil and gas revenues     $    25,672  $    12,314  $    67,966  $    31,549 
                         -----------  -----------  -----------  ----------- 
Expenses:                                                                   
  Lease operating                                                           
   expenses                    2,303        1,048        5,382        2,352 
  Production taxes             2,376        1,067        6,647        2,975 
  Depreciation,                                                             
   depletion, and                                                           
   amortization                7,796        3,820       21,106        9,316 
  General and                                                               
   administrative              1,938        1,514        6,876        4,013 
                         -----------  -----------  -----------  ----------- 
    Total expenses            14,413        7,449       40,011       18,656 
                         -----------  -----------  -----------  ----------- 
Operating income              11,259        4,865       27,955       12,893 
                         -----------  -----------  -----------  ----------- 
                                                                            
Other income (expense):                                                     
  Commodity derivative                                                      
   gain (loss)                (1,005)         540         (763)         386 
  Interest income and                                                       
   expense, net                   22          (89)          70          (74)
                         -----------  -----------  -----------  ----------- 
    Total other income                                                      
     (expense)                  (983)         451         (693)         312 
                         -----------  -----------  -----------  ----------- 
    Income tax provision       3,116        1,701        8,841        4,620 
                         -----------  -----------  -----------  ----------- 
Net income               $     7,160  $     3,615  $    18,421  $     8,585 
                         ===========  ===========  ===========  =========== 
Net income per common                                                       
 share:                                                                     
  Basic                  $      0.09  $      0.07  $      0.24  $      0.16 
                         ===========  ===========  ===========  =========== 
  Diluted                $      0.09  $      0.06  $      0.24  $      0.15 
                         ===========  ===========  ===========  =========== 
Weighted average shares                                                     
 outstanding:                                                               
  Basic                   77,176,420   55,238,098   75,689,903   53,283,695 
                         ===========  ===========  ===========  =========== 
  Diluted                 79,008,619   58,918,586   77,299,456   55,623,990 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                                                                            
                       SYNERGY RESOURCES CORPORATION                        
                     CONDENSED STATEMENTS OF CASH FLOWS                     
                         (unaudited, in thousands)                          
                                                                            
                                                         Nine Months Ended  
                                                        ------------------- 
                                                         May 31,    May 31, 
                                                           2014      2013   
                                                        ---------  -------- 
                                                                            
Cash flows from operating activities:                                       
  Net income                                            $  18,421  $  8,585 
                                                        ---------  -------- 
  Adjustments to reconcile net income to net cash                           
   provided by operating activities:                                        
    Depreciation, depletion, and amortization              21,106     9,316 
    Provision for deferred taxes                            8,841     4,620 
    Other, non-cash items                                     917       626 
    Changes in operating assets and liabilities            (2,540)    5,096 
                                                        ---------  -------- 
  Total adjustments                                        28,324    19,658 
                                                        ---------  -------- 
    Net cash provided by operating activities              46,745    28,243 
                                                        ---------  -------- 
Cash flows from investing activities:                                       
  Acquisition of property and equipment                  (112,155)  (70,269)
  Net proceeds from sales of oil and gas properties           704         - 
  Net proceeds from short term investments                 60,018         - 
                                                        ---------  -------- 
  Net cash used in investing activities                   (51,433)  (70,269)
                                                        ---------  -------- 
Cash flows from financing activities:                                       
  Proceeds from exercise of warrants                       33,380       467 
  Proceeds from revolving credit facility                       -    41,486 
  Other                                                      (176)        - 
                                                        ---------  -------- 
  Net cash provided by financing activities                33,204    41,953 
                                                        ---------  -------- 
Net increase (decrease) in cash and equivalents            28,516       (73)
Cash and equivalents at beginning of period                19,463    19,284 
                                                        ---------  -------- 
Cash and equivalents at end of period                      47,979    19,211 
                                                        ---------  -------- 
Short term investments                                          -         - 
                                                        ---------  -------- 
Cash, equivalents and short term investments            $  47,979  $ 19,211 
                                                        =========  ======== 
                                                                            
                                                                            
                                                                            
                                                                            
                       SYNERGY RESOURCES CORPORATION                        
                 CONDENSED STATEMENTS OF OPERATING EXPENSES                 
                         (unaudited, in thousands)                          
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                 --------------------  -------------------- 
                                  May 31,    May 31,    May 31,    May 31,  
                                    2014       2013       2014       2013   
                                 ---------  ---------  ---------  --------- 
LEASE OPERATING EXPENSES (LOE)                                              
Production costs                 $   2,252  $     993  $   5,252  $   2,153 
Work-over                               51         55        130        199 
                                 ---------  ---------  ---------  --------- 
  Lifting costs                      2,303      1,048      5,382      2,352 
                                 ---------  ---------  ---------  --------- 
Severance and ad valorem taxes       2,376      1,067      6,647      2,975 
                                 ---------  ---------  ---------  --------- 
  Total LOE                      $   4,679  $   2,115  $  12,029  $   5,327 
                                 =========  =========  =========  ========= 
                                                                            
DEPRECIATION, DEPLETION AND                                                 
 AMORTIZATION (DDA)                                                         
Depletion                        $   7,569  $   3,744  $  20,550  $   9,123 
Depreciation and amortization          227         76        556        193 
                                 ---------  ---------  ---------  --------- 
  Total DDA                      $   7,796  $   3,820  $  21,106  $   9,316 
                                 =========  =========  =========  ========= 
                                                                            
GENERAL AND ADMINISTRATIVE (G&A)                                            
G&A costs incurred               $   2,238  $   1,703  $   7,797  $   4,428 
Capitalized costs                     (300)      (189)      (921)      (415)
                                 ---------  ---------  ---------  --------- 
  Totals                         $   1,938  $   1,514  $   6,876  $   4,013 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            

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