Denver-based Extraction Oil and Gas Inc. on Monday said it planned to refile its quarterly financial statements issued in November for 3Q2019 and the first nine months of the year after determining there were “material misstatements.”

The details about the refiling were included in a Form 8-K filing with the Securities and Exchange Commission. Extraction said on Dec. 17, in consultation with the board’s audit committee, it concluded that the unaudited quarterly financial statements included in the Form 10-Q originally filed “should no longer be relied upon” because of the findings.

The conclusion “was reached due to an accounting error relating to the improper identification of the contract termination date for one of the company’s revenue contracts that included an automatic renewal provision.”

The termination date impacted the amount that could be included in the transaction price, management said. Accounting for an earlier termination date led to a “decrease to the company’s revenues and net income” for 3Q2019 and for the nine-month period.

Extraction said it also has reassessed its conclusions regarding the disclosure controls and procedures for all interim periods in 2019 because of the misstatements discovered and “determined that a material weakness in internal control over financial reporting existed as of Sept. 30, 2019…”

Extraction primarily works in the Wattenberg field within the Denver-Julesburg Basin of Colorado.

For 3Q2019, Extraction initially reported net income of $48 million (28 cents/share), driven primarily by an $88 million gain on commodity derivatives. In 3Q2018, net income was $65 million (33 cents/share). Reported crude oil, natural gas and natural gas liquids revenue was $197 million in the quarter, down 30% year/year and flat sequentially because of lower commodity prices.

“Extraction saw modest improvements in its crude oil differential during the third quarter as new pipelines from the Permian Basin to the Gulf Coast were brought online and started to alleviate the congestion of light crude oil in Cushing,” management noted.

Third quarter output “was negatively impacted by approximately 8,000 boe/d due to a prolonged unplanned midstream outage in our Southwest Wattenberg area,” acting CEO Matt Owens said in the quarterly report. Extraction’s “midstream diversification efforts are all operational, and we are no longer constrained by the midstream bottlenecks we have experienced over the past few years.

"We are now moving gas from East Greeley down Rocky Mountain Midstream's gathering line, select volumes from our Windsor area to RimRock's Pierce plant, and volumes from Broomfield to Elevation Midstream's Badger central gathering facility. Going forward, we expect our midstream diversification and redundancy to enable more reliable and consistent production while improving our capital efficiency."