Roan Resources, Inc. Reports Second Quarter 2019 Results

Date : 08/07/2019 @ 9:15PM
Source : Business Wire
Stock : Roan Resources Inc (ROAN)
Quote : 1.715  -0.055 (-3.11%) @ 8:57PM
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Roan Resources, Inc. Reports Second Quarter 2019 Results

Roan Resources (NYSE:ROAN)
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2 Months : From Jul 2019 to Sep 2019

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Roan Resources, Inc. (NYSE: ROAN) (“Roan” or the “Company”) today announced second quarter 2019 operating and financial results.

Second Quarter 2019 Highlights

  • Production of approximately 50.8 thousand barrels of oil equivalent per day (MBoe/d) (26% oil, 29% natural gas liquids (NGLs), 45% gas); the Company elected to be in ethane rejection for the months of May and June which is estimated to have negatively impacted production in those months by approximately 3.3 MBoe/d;
  • Net income was $27.2 million, or $0.18 per diluted share; Adjusted EBITDAX(1) (non-GAAP) was $79.3 million;
  • Capital expenditures totaled approximately $114.3 million, approximately $26 million less than the adjusted guidance
    • Lowering full-year 2019 capital expenditures to $495 to $525 million, down $30 million from the previous top end of the range;
  • Enhanced liquidity position by approximately $100 million with the completion of term loan facility in June;
  • Over 95% of remaining oil production for 2019 is hedged at over $60 per barrel WTI and over 75% of remaining natural gas production for 2019 is hedged at approximately $2.90 per MMBtu;
  • Completed 4-well Red Bullet/Silver Charm unit, located in Canadian County; average 30-day initial production (IP) rate of 1,545 Boe/d (41% oil, 26% NGLs, 33% gas) normalized to 10,000-foot lateral;
  • Continued to reduce overall drilling costs and achieved record drill time of 6.4 days for a 2-mile Mayes well; drill costs per foot down approximately 25% compared to first quarter 2019;
  • Completion costs per foot improved by approximately 20% compared to the first quarter 2019;
  • Entered into a definitive crude oil gathering agreement with Blue Mountain Midstream LLC and a definitive agreement with Glass Mountain Pipeline and Navigator SMS Pipeline LLC to blend and ship crude oil to Cushing, OK, which will decrease crude transportation costs by approximately 50% on gathered barrels; and
  • The Company remains focused on evaluating various strategic options alongside its advisors.

“We are pleased with the progress the Company has made this quarter,” said Joseph A. Mills, Roan’s Executive Chairman of the Board. “Our focus has been on driving down our overall cost structure and delivering on our production expectations. We were able to beat production on a significantly lower capital spend. The recently completed optimized wells are performing in-line with expectations and are costing less than original forecasts. Finally, our strategic initiative process remains a key focus for the Company and expect to announce the results as soon as possible.”

 

(1)

Please see the supplemental financial information in the table under “Non-GAAP Financial Measures” at the end of this earnings release for a reconciliation of the non-GAAP financial measure of Adjusted EBITDAX to its most directly comparable GAAP financial measure

Operational Update

Roan’s second quarter 2019 average daily production was approximately 50.8 MBoe/d (26% oil, 29% NGLs, 45% gas), which exceeded adjusted guidance of 50 MBoe/d, and represented an increase of 41% as compared to the second quarter of 2018.

 

 

2Q 2019

 

1Q 2019

 

2Q 2018

Production Data

 

 

Oil (MBbls)

1,198

 

1,139

 

877

Natural gas (MMcf)

12,533

 

11,620

 

9,157

Natural gas liquids (MBbls)

1,339

 

1,329

 

883

Total volumes (MBoe)

4,626

 

4,405

 

3,286

Average daily total volumes (MBoe/d)

50.8

 

48.9

 

36.1

The Company drilled 17 gross (12.7 net) operated wells (30.5 gross lateral miles) during the second quarter. The Company also brought online 22 gross (15.3 net) operated wells during the quarter, which is three ahead of schedule due to an improvement in cycle times. The average 30-day rate for the 22 gross operated wells brought online during the quarter was 1,165 MBoe/d (42% oil, 23% NGLs, 35% gas), when normalized to a 10,000-foot lateral, with an actual average lateral length of 8,900 feet.

2Q 2019

YTD 2019

Operated Well Data

 

Drilled gross wells

17

 

36

Drilled net wells

12.7

 

26.0

Drilled gross lateral miles

30.5

 

66.5

First sales gross wells

22

 

37

First sales net wells

15.3

 

28.0

Highlight wells from the second quarter include the Mad Play unit, the Mayes Earl wells, the Mayes Victory Slide wells, the Zenyatta unit and the Red Bullet/Silver Charm unit.

  • The 4-well Mad Play unit had an average 30-day IP of 1,601 Boe/d (44% oil, 20% NGLs, 36% gas) and an average 90-day IP of 1,240 Boe/d (42% oil, 20% NGLs, 38% gas) from a normalized 10,000-foot lateral (with an actual lateral length of 6,780 feet), with an average well cost under $7 million.
  • The three optimized Mayes wells in the Earl unit had an average 30-day IP of 1,466 Boe/d (39% oil, 24% NGLs, 37% gas) and an average 90-day IP of 1,222 Boe/d (32% oil, 24% NGLs, 44% gas) from a normalized 10,000-foot lateral (with an actual lateral length of 10,160 feet), with an average well cost $7.4 million.
  • The two Mayes Victory Slide wells had an average 30-day IP of 1,170 Boe/d (67% oil, 15% NGLs, 18% gas) and an average 60-day IP of 1,091 Boe/d (64% oil, 17% NGLs, 19% gas) from a normalized 10,000-foot lateral (with an actual lateral length of 9,900 feet), with an average well cost of approximately $6 million.

The Zenyatta unit is a 2-well Woodford unit located in Stephens County with approximately 1,000 feet of horizontal separation between wellbores and tested two different Woodford zones, located in the southern SCOOP.

  • The 2-well Zenyatta unit had an average 30-day IP of 1,104 Boe/d (32% oil, 32% NGLs, 36% gas) and an average 90-day IP of 1,004 Boe/d (27% oil, 34% NGLs, 39% gas) from a normalized 10,000-foot lateral (with an actual lateral length of 9,750 feet).

The Red Bullet/Silver Charm unit was completed at the end of the second quarter and is a 4-well unit, with two Mayes wells and two Woodford wells, with 800 to 1,160 feet of horizontal separation and approximately 200 feet of vertical separation between wellbores located in the western Merge. The average per well 30-day IP rates is as follows:

  • The 4-well Red Bullet/Silver Charm unit flowed an average 1,545 Boe/d (41% oil, 26% NGLs, 33% gas) from a normalized 10,000-foot lateral (with an actual lateral length of 9,500 feet), with an average well cost of approximately $8 million.

Drill times continue to improve, and the Company drilled its fastest 2-mile well to date during the quarter. The Fusaichi Pegasus 9-4-13-6 3MXH well was drilled in 6.4 days, nearly 60% faster than the average drill time for 2-mile Mayes wells. As a result of faster drill times, drill costs continue to decrease. The Company drilled its wells for an average cost per foot of $140, approximately 25% lower than the previous quarter.

Completion costs per foot also improved by approximately 20% compared to the first quarter of 2019 as a result of lower service costs, more efficient frac designs and more efficient drillouts.

In July, it was announced that Roan had entered into a definitive crude oil gathering agreement with Blue Mountain Midstream LLC. This agreement is for 10 years covering 89,000 net acres in the Merge. Earlier this year, the Company also entered into a definitive agreement with Glass Mountain Pipeline and Navigator SMS Pipeline LLC to blend and ship barrels to Cushing, OK on pipelines for the same dedicated acres. The gathering agreement with Blue Mountain is expected to decrease crude transportation costs by approximately 50% on gathered barrels, as well as decrease volatility in the cost structure for crude transportation. The pipelines should be operational before the end of the year.

Financial Update

Second quarter 2019 net income was $27.2 million, or $0.18 per dilutive share, and adjusted net income (non-GAAP) was $16.9 million, or $0.11 per dilutive share. Second quarter 2019 Adjusted EBITDAX (non-GAAP) was $79.3 million.

See the definitions and reconciliations of adjusted net income, adjusted net income per share, Adjusted EBITDAX, net debt and cash general and administrative (G&A) expense presented within this release to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures provided in the supporting tables or definitions at the conclusion of this press release.

Second quarter 2019 average realized prices were $57.76 per barrel of oil (Bo), $11.08 per barrel of NGLs and $1.04 per Mcf of natural gas, resulting in a total equivalent unhedged price of $20.99 per Boe or a total equivalent hedged price of $22.59 per Boe, down 4% quarter over quarter due primarily to further weakness in the NGL and natural gas markets.

The Company’s adjusted cash operating costs (non-GAAP) for the second quarter were $5.44 per Boe, including production expense of $2.44 per Boe, production tax of $1.09 per Boe and cash G&A expense (non-GAAP) of $1.91 per Boe. Both production expense and cash G&A expense were down quarter-over-quarter on a total dollar and per Boe basis. Production expenses benefited from the water disposal agreement with Blue Mountain Midstream LLC, which started early in the second quarter.

Capital expenditures for second quarter 2019 totaled approximately $114.3 million, a $58.5 million reduction as compared to the first quarter 2019 and below adjusted guidance by approximately $26 million. However, approximately $20 million of capital expenditures that were forecasted to be included in second quarter are expected to be recorded in subsequent quarters due to timing and working interest adjustments. The additional reduction to capital expenditures is primarily due to lower completed well costs.

As of the end of the second quarter, Roan had $5.4 million of cash on the balance sheet, $659.6 million drawn on its revolving credit facility and $50.0 million funded on its term loan, resulting in net funded debt of $704.2 million.

During the quarter, the Company enhanced its liquidity position by approximately $100 million through the closing of a term loan facility funded by affiliates of certain significant shareholders of the Company. The facility was secured at favorable terms for the Company with an interest rate of the three-month LIBOR rate plus 7.5%. As a result, the Company had approximately $150 million of available liquidity as of June 30, 2019.

For the remainder of the year, the Company is over 95% hedged for oil at an average price of $60.39 per barrel and over 75% hedged for natural gas at an average price of $2.90 per MMbtu. A table of the Company’s derivative contracts as of August 7, 2019 is provided at the conclusion of this press release.

Updated Guidance

For the remainder of the year, the Company is projecting it will be in ethane rejection instead of ethane recovery, which impacts production on a monthly basis by approximately 3.3 MBoe/d. After incorporating adjustments for ethane rejection for the forecasted period and the outperformance of the second quarter, the Company is updating its full-year 2019 production guidance to be between 50.5 MBoe/d and 53.5 MBoe/d.

The Company is also reducing full-year 2019 production expense guidance to $2.80 - $3.10 per Boe, to reflect cost reduction initiatives exhibited in the second quarter.

Additionally, the Company is adjusting cash G&A (non-GAAP) to $2.00 to $2.20 per Boe, as a result of the impact of the adjusted volume forecast on the unit cost calculation.

Capital expenditures have been lower than originally forecasted as a result of lower completed well costs due to shorter cycle times and optimized well designs, and lower working interests in operated wells than originally forecasted. For the full-year 2019, capital expenditures are now expected to be between $495 million to $525 million, down $30 million from the prior top-end of guidance. The Company remains focused on achieving free cash flow by the fourth quarter. A table with updated 2019 guidance can be found at the conclusion of this release.

Second Quarter 2019 Earnings Conference Call

Roan will host a conference call to discuss second quarter 2019 results on Thursday, August 8, 2019 at 11:00 a.m. ET (10:00 a.m. CT). Interested parties may listen to the conference call via webcast on the Company’s website at www.RoanResources.com under the “Investor Relations” section of the site or by phone. The Company plans to post a presentation to the website prior to the start of the call.

Dial-in: 877-699-1024 International dial-in: 647-689-5461 Conference ID: 9986485

A replay of the webcast will be available on the Company’s website and a replay of the call will be available for two weeks by phone:

Replay dial-in: 800-585-8367 or 416-621-4642 Conference ID: 9986485

About Roan Resources

Roan is an independent oil and natural gas company headquartered in Oklahoma City, OK focused on the development, exploration and acquisition of unconventional oil and natural gas reserves in the Merge, SCOOP and STACK plays of the Anadarko Basin in Oklahoma. For more information, please visit www.RoanResources.com, where we routinely post announcements, updates, events, investor information, presentations and recent news releases.

Cautionary Statements

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, are forward-looking statements which contain our current expectations about future results. These forward-looking statements are based on certain assumptions and expectations made by the Company, which reflect management’s experience, estimates and perception of historical trends, current conditions and anticipated future developments. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or anticipated in the forward-looking statements. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2018 and any subsequently filed quarterly reports on Form 10-Q.

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, or incidental to the development, production, gathering and sale of oil, natural gas and NGLs. These risks include, but are not limited to, the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance, the structure and timing of any transaction or strategic alternative and whether any transaction or strategic alternative will be completed, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks.

Reserve engineering is a process of estimating underground accumulations of oil, natural gas and NGLs 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 estimates that were made previously. 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 oil, natural gas and NGLs that are ultimately recovered.

Should one or more of the risks or uncertainties described occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this release.

Financial Statements

The information in the following financial statements and tables reflect the results of Roan Resources LLC prior to September 24, 2018 and on and after September 24, 2018, the results of Roan Resources, Inc.

 

 

Roan Resources, Inc.

Unaudited Condensed Consolidated Statements of Operations

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in thousands, except per share amounts)

Revenues

 

 

 

 

 

 

 

Oil sales

$

69,196

 

 

$

58,677

 

 

$

129,767

 

 

$

122,369

 

Natural gas sales

6,659

 

 

11,126

 

 

17,848

 

 

21,458

 

Natural gas sales – Affiliates

6,430

 

 

2,881

 

 

17,022

 

 

9,439

 

Natural gas liquid sales

8,482

 

 

13,205

 

 

16,820

 

 

25,144

 

Natural gas liquid sales – Affiliates

6,353

 

 

4,678

 

 

14,202

 

 

13,127

 

Gain (loss) on derivative contracts

37,054

 

 

(54,602

)

 

(46,588

)

 

(64,216

)

Total revenues

134,174

 

 

35,965

 

 

149,071

 

 

127,321

 

Operating Expenses

 

 

 

 

 

 

 

Production expenses

6,723

 

 

7,019

 

 

21,569

 

 

15,374

 

Production expenses - Affiliates

4,580

 

 

 

 

4,580

 

 

 

Production taxes

5,065

 

 

2,296

 

 

10,104

 

 

4,682

 

Exploration expenses

11,406

 

 

10,633

 

 

23,894

 

 

18,483

 

Depreciation, depletion, amortization and accretion

44,893

 

 

24,601

 

 

86,465

 

 

46,466

 

General and administrative

12,311

 

 

13,086

 

 

28,136

 

 

27,106

 

Loss (gain) on sale of other assets

50

 

 

 

 

(614

)

 

 

Total operating expenses

85,028

 

 

57,635

 

 

174,134

 

 

112,111

 

Total operating income (loss)

49,146

 

 

(21,670

)

 

(25,063

)

 

15,210

 

Other income (expense)

 

 

 

 

 

 

 

Interest expense, net

(8,462

)

 

(1,087

)

 

(15,206

)

 

(2,886

)

Other

(28

)

 

 

 

(28

)

 

 

Net income (loss) before income taxes

40,656

 

 

(22,757

)

 

(40,297

)

 

12,324

 

Income tax expense (benefit)

13,410

 

 

 

 

(9,487

)

 

 

Net income (loss)

$

27,246

 

 

$

(22,757

)

 

$

(30,810

)

 

$

12,324

 

Earnings (loss) per share

 

 

 

 

 

 

 

Basic

$

0.18

 

 

$

(0.15

)

 

$

(0.20

)

 

$

0.08

 

Diluted

$

0.18

 

 

$

(0.15

)

 

$

(0.20

)

 

$

0.08

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

Basic

152,607

 

 

152,540

 

 

152,573

 

 

151,920

 

Diluted

152,725

 

 

152,540

 

 

152,573

 

 

151,920

 

 

 

Roan Resources, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

 

 

June 30, 2019

 

December 31, 2018

 

(in thousands, except par value and share data)

ASSETS

 

 

 

Current assets

 

 

 

Cash and cash equivalents

$

5,428

 

 

$

6,883

 

Accounts receivable

 

 

 

Oil, natural gas and natural gas liquid sales

44,475

 

 

55,564

 

Joint interest owners and other, net

164,156

 

 

133,387

 

Affiliates

2,979

 

 

9,669

 

Prepaid drilling advances

15,996

 

 

28,977

 

Derivative contracts

30,511

 

 

82,180

 

Other current assets

4,296

 

 

6,655

 

Total current assets

267,841

 

 

323,315

 

Noncurrent assets

 

 

 

Oil and natural gas properties, successful efforts method

2,913,621

 

 

2,628,333

 

Accumulated depreciation, depletion, amortization and impairment

(335,678

)

 

(230,836

)

Oil and natural gas properties, net

2,577,943

 

 

2,397,497

 

Derivative contracts

12,017

 

 

20,638

 

Other

12,873

 

 

7,659

 

Total assets

$

2,870,674

 

 

$

2,749,109

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities

 

 

 

Accounts payable

$

85,031

 

 

$

49,746

 

Accrued liabilities

116,174

 

 

176,494

 

Accounts payable and accrued liabilities – Affiliates

4,111

 

 

8,577

 

Revenue payable

100,070

 

 

97,963

 

Drilling advances

20,969

 

 

31,058

 

Derivative contracts

26

 

 

845

 

Other current liabilities

2,655

 

 

790

 

Total current liabilities

329,036

 

 

365,473

 

Noncurrent liabilities

 

 

 

Long-term debt

659,639

 

 

514,639

 

Long-term debt, net - Affiliates

44,924

 

 

 

Deferred tax liabilities, net

347,376

 

 

356,862

 

Asset retirement obligations

17,496

 

 

16,058

 

Derivative contracts

 

 

141

 

Other

5,818

 

 

902

 

Total liabilities

1,404,289

 

 

1,254,075

 

Commitments and contingencies

 

 

 

Equity

 

 

 

Class A common stock, $0.001 par value; 800,000,000 shares authorized; 154,064,927 shares issued and outstanding at June 30, 2019 and 152,539,532 shares issued and outstanding at December 31, 2018

154

 

 

153

 

Preferred stock, $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding at June 30, 2019 or December 31, 2018

 

 

 

Additional paid-in capital

1,648,561

 

 

1,646,401

 

Accumulated deficit

(182,330

)

 

(151,520

)

Total equity

1,466,385

 

 

1,495,034

 

Total liabilities and equity

$

2,870,674

 

 

$

2,749,109

 

 

Roan Resources, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

Six Months Ended June 30,

 

2019

 

2018

 

(in thousands)

Cash flows from operating activities

 

 

 

Net (loss) income

$

(30,810

)

 

$

12,324

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

Depreciation, depletion, amortization and accretion

86,465

 

 

46,466

 

Unproved leasehold amortization and impairment

22,232

 

 

14,471

 

Gain on sale of other assets

(614

)

 

 

Amortization of deferred financing costs

875

 

 

341

 

Loss on derivative contracts

46,588

 

 

64,216

 

Net cash received (paid) upon settlement of derivative contracts

8,677

 

 

(13,911

)

Equity-based compensation

(157

)

 

5,127

 

Deferred income taxes

(9,487

)

 

 

Other

6,547

 

 

117

 

Changes in operating assets and liabilities increasing (decreasing) cash:

 

 

 

Accounts receivable and other assets

(21,667

)

 

(9,036

)

Accounts payable and other liabilities

(2,656

)

 

44,415

 

Net cash provided by operating activities

105,993

 

 

164,530

 

Cash flows from investing activities

 

 

 

Acquisition of oil and natural gas properties

 

 

(22,935

)

Capital expenditures for oil and natural gas properties

(304,896

)

 

(314,662

)

Acquisition of other property and equipment

(83

)

 

(2,371

)

Proceeds from sale of other assets

1,214

 

 

 

Net cash used in investing activities

(303,765

)

 

(339,968

)

Cash flows from financing activities

 

 

 

Proceeds from borrowings

190,000

 

 

199,300

 

Proceeds from borrowings - Affiliates

48,750

 

 

 

Repayment of borrowings

(45,000

)

 

 

Other

2,567

 

 

(957

)

Net cash provided by financing activities

196,317

 

 

198,343

 

Net (decrease) increase in cash and cash equivalents

(1,455

)

 

22,905

 

Cash and cash equivalents, beginning of period

6,883

 

 

1,471

 

Cash and cash equivalents, end of period

$

5,428

 

 

$

24,376

 

 

 

 

 

The following table represents the Company's open commodity contracts at August 7, 2019:

 

3Q19

 

4Q19

 

 

 

Bal 2019

 

2020

 

2021

Oil Hedges

 

 

 

 

 

 

Volume Hedged Daily (Bbls/d)

14,151

 

13,051

 

 

 

13,601

 

9,370

 

4,740

Average Hedge Price ($/Bbl)

$60.04

 

$60.74

 

 

 

$60.39

 

$60.57

 

$56.08

 

 

 

 

 

 

 

 

 

 

 

 

Natural Gas Hedges

 

 

 

 

 

 

 

 

 

 

 

Volume Hedged Daily (MMBtu/d)

110,000

 

120,000

 

 

 

115,000

 

43,730

 

9,863

Average Hedge Price ($/MMBtu)

$2.91

 

$2.90

 

 

 

$2.90

 

$2.64

 

$2.86

 

 

 

 

 

 

 

 

 

 

 

 

NGL Hedges

 

 

 

 

 

 

 

 

 

 

 

Volume Hedged Daily (Bbls/d)

3,000

 

3,000

 

 

 

3,000

 

1,500

 

-

Average Hedge Price ($/Bbl)

$32.25

 

$32.25

 

 

 

$32.25

 

$24.50

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Gas Basis Hedges

 

 

 

 

 

 

 

 

 

 

 

Volume Hedged Daily (MMBtu/d)

80,000

 

80,000

 

 

 

80,000

 

30,000

 

-

Average Hedge Price ($/MMBtu)

($0.60)

 

($0.60)

 

 

 

($0.60)

 

($0.49)

 

-

 

Results of Operations

The following tables represent the Company's production and average realized prices:

 

 

Three Months Ended June 30,

 

2019

 

2018

Production Data

 

 

 

Oil (MBbls)

1,198

 

 

877

 

Natural gas (MMcf)

12,533

 

 

9,157

 

Natural gas liquids (MBbls)

1,339

 

 

883

 

Total volumes (MBoe)

4,626

 

 

3,286

 

Average daily total volumes (MBoe/d)

50.8

 

 

36.1

 

Average Prices - as reported

 

 

 

Oil (per Bbl)

$

57.76

 

 

$

66.91

 

Natural gas (per Mcf)

$

1.04

 

 

$

1.53

 

Natural gas liquids (per Bbl)

$

11.08

 

 

$

20.25

 

Total (per Boe)

$

20.99

 

 

$

27.56

 

Average Prices - including impact of derivative contract settlements

 

 

 

Oil (per Bbl)

$

58.17

 

 

$

54.41

 

Natural gas (per Mcf)

$

1.33

 

 

$

1.66

 

Natural gas liquids (per Bbl)

$

13.53

 

 

$

20.25

 

Total (per Boe)

$

22.59

 

 

$

24.59

 

Average Prices - excluding gathering, transportation and processing costs

 

 

 

Oil (per Bbl)

$

58.00

 

 

$

66.91

 

Natural gas (per Mcf)

$

1.82

 

 

$

1.95

 

Natural gas liquids (per Bbl)

$

15.57

 

 

$

26.60

 

Total (per Boe)

$

24.45

 

 

$

30.44

 

 

Six Months Ended June 30,

 

2019

 

2018

Production Data

 

 

 

Oil (MBbls)

2,337

 

 

1,915

 

Natural gas (MMcf)

24,153

 

 

18,069

 

Natural gas liquids (MBbls)

2,668

 

 

1,757

 

Total volumes (MBoe)

9,031

 

 

6,684

 

Average daily total volumes (MBoe/d)

49.9

 

 

36.9

 

Average Prices - as reported

 

 

 

Oil (per Bbl)

$

55.53

 

 

$

63.90

 

Natural gas (per Mcf)

$

1.44

 

 

$

1.71

 

Natural gas liquids (per Bbl)

$

11.63

 

 

$

21.78

 

Total (per Boe)

$

21.67

 

 

$

28.66

 

Average Prices - including impact of derivative contract settlements

 

 

 

Oil (per Bbl)

$

58.80

 

 

$

55.70

 

Natural gas (per Mcf)

$

1.43

 

 

$

1.81

 

Natural gas liquids (per Bbl)

$

13.69

 

 

$

21.78

 

Total (per Boe)

$

23.08

 

 

$

26.58

 

Average Prices - excluding gathering, transportation and processing costs

 

 

 

Oil (per Bbl)

$

55.69

 

 

$

63.90

 

Natural gas (per Mcf)

$

2.15

 

 

$

2.17

 

Natural gas liquids (per Bbl)

$

15.94

 

 

$

27.63

 

Total (per Boe)

$

24.87

 

 

$

31.43

 

Operating Expenses

Our operating expenses reflect costs incurred in the development, production and sale of oil, natural gas and NGLs. The following table provides information on our operating expenses:

 

Three Months Ended June 30,

 

2019

 

2018

 

(in thousands, except costs per Boe)

Operating Expenses

 

 

 

Production expenses

$

11,303

 

 

$

7,019

 

Production taxes

5,065

 

 

2,296

 

Exploration expenses

11,406

 

 

10,633

 

Depreciation, depletion, amortization and accretion

44,893

 

 

24,601

 

General and administrative (1)

12,311

 

 

13,086

 

Loss on sale of other assets

50

 

 

 

Total

$

85,028

 

 

$

57,635

 

Average Costs per Boe

 

 

 

Production expenses

$

2.44

 

 

$

2.14

 

Production taxes

1.09

 

 

0.70

 

Exploration expenses

2.47

 

 

3.24

 

Depreciation, depletion, amortization and accretion

9.70

 

 

7.49

 

General and administrative (1)

2.66

 

 

3.98

 

Loss on sale of other assets

0.01

 

 

 

Total

$

18.37

 

 

$

17.55

 

(1)

 

General and administrative expenses for the three months ended June 30, 2019 and 2018 include $(3.2) million, or $(0.70) per Boe, and $2.8 million, or $0.86 per Boe, of equity-based compensation expense, respectively. General and administrative expenses for the three months ended June 30, 2019 includes $3.9 million, or $0.83 per Boe, of expense for allowance for doubtful accounts, $2.2 million, or $0.47 per Boe, of aborted offering costs and $0.7 million, or $0.14 per Boe, of expense for severance and employee related matters.

 

Six Months Ended June 30,

 

2019

 

2018

 

(in thousands, except costs per Boe)

Operating Expenses

 

 

 

Production expenses

$

26,149

 

 

$

15,374

 

Production taxes

10,104

 

 

4,682

 

Exploration expenses

23,894

 

 

18,483

 

Depreciation, depletion, amortization and accretion

86,465

 

 

46,466

 

General and administrative (1)

28,136

 

 

27,106

 

Gain on sale of other assets

(614

)

 

 

Total

$

174,134

 

 

$

112,111

 

Average Costs per Boe

 

 

 

Production expenses

$

2.90

 

 

$

2.30

 

Production taxes

1.12

 

 

0.70

 

Exploration expenses

2.65

 

 

2.77

 

Depreciation, depletion, amortization and accretion

9.57

 

 

6.95

 

General and administrative (1)

3.12

 

 

4.06

 

Gain on sale of other assets

(0.07

)

 

 

Total

$

19.29

 

 

$

16.78

 

(1)

 

General and administrative expenses for the six months ended June 30, 2019 and 2018 include $(0.2) million, or $(0.02) per Boe, and $5.1 million, or $0.77 per Boe, of equity-based compensation expense, respectively. General and administrative expenses for the six months ended June 30, 2019 includes $5.3 million, or $0.59 per Boe, of expense for allowance for doubtful accounts, $2.2 million, or $0.24 per Boe, of aborted offering costs and $0.7 million, or $0.07 per Boe, of expense for severance and employee related matters.

Non-GAAP Financial Measures

Adjusted Net Income and Adjusted Net Income per Share

Adjusted net income and adjusted net income per share are non-GAAP performance measures. The Company defines adjusted net income and adjusted net income per share as net income (loss) and net income (loss) per share excluding non-cash gains or losses on derivatives, gains on early terminations of derivative contracts, exploration expense, aborted offering costs, severance and other employee matter expense and loss (gain) on the sale of other assets. Management uses adjusted net income and adjusted net income per share as an indicator of the Company's operational trends and performance relative to other oil and natural gas companies. Adjusted net income and adjusted net income per share should not be considered an alternative to net income (loss), operating income, or any other measure of financial performance presented in accordance with GAAP or as an indicator of our operating performance.

Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Net Income per Share

 

Three Months Ended June 30,

 

2019

 

2018

 

(in thousands)

 

(per diluted share)

 

(in thousands)

 

(per diluted share)

 

 

 

 

 

 

 

 

Net Income (Loss)

$

27,246

 

 

$

0.18

 

 

$

(22,757

)

 

$

(0.15

)

Adjusted for

 

 

 

 

 

 

 

(Gain) loss on derivative contracts

(37,054

)

 

(0.24

)

 

54,602

 

 

0.36

 

Cash received (paid) upon settlement of derivative contracts

7,361

 

 

0.05

 

 

(9,773

)

 

(0.06

)

Exploration expense

11,406

 

 

0.07

 

 

10,633

 

 

0.07

 

Aborted offering costs

2,155

 

 

0.01

 

 

 

 

 

Severance and employee matters

687

 

 

 

 

 

 

 

Loss on sale of other assets

50

 

 

 

 

 

 

 

Total tax effect of adjustments (1)

5,080

 

 

0.03

 

 

 

 

 

Adjusted Net Income

$

16,931

 

 

$

0.11

 

 

$

32,705

 

 

$

0.21

 

(1) Computed by applying a combined federal and state effective tax rate of 33.0% for the period.

 

Six Months Ended June 30,

 

2019

 

2018

 

(in thousands)

 

(per diluted share)

 

(in thousands)

 

(per diluted share)

 

 

 

 

 

 

 

 

Net Income (Loss)

$

(30,810

)

 

$

(0.20

)

 

$

12,324

 

 

$

0.08

 

Adjusted for

 

 

 

 

 

 

 

Loss on derivative contracts

46,588

 

 

0.31

 

 

64,216

 

 

0.42

 

Cash received (paid) upon settlement of derivative contracts (1)

12,743

 

 

0.08

 

 

(14,288

)

 

(0.09

)

Exploration expense

23,894

 

 

0.16

 

 

18,483

 

 

0.12

 

Aborted offering costs

2,155

 

 

0.01

 

 

 

 

 

Severance and employee matters

687

 

 

 

 

 

 

 

Gain on sale of other assets

(614

)

 

 

 

 

 

 

Total tax effect of adjustments (2)

(20,082

)

 

(0.13

)

 

 

 

 

Adjusted Net Income

$

34,561

 

 

$

0.23

 

 

$

80,735

 

 

$

0.53

 

(1)

 

Excludes cash received upon settlement of derivative contracts prior to the original contractual maturity for the six months ended June 30, 2018

(2)

 

Computed by applying a combined federal and state effective tax rate of 23.5% for the period.

Adjusted EBITDAX

Adjusted EBITDAX is a non-GAAP financial measure. The Company defines Adjusted EBITDAX as net income (loss) adjusted for interest expense, income tax expense (benefit), depreciation, depletion, amortization and accretion, exploration expense, non-cash equity-based compensation expense, aborted offering costs, severance and employee matter expenses, expense for allowance for doubtful accounts, (gain) loss on derivative contracts, and cash (paid) received upon settlement of derivative contracts, excluding amounts on contracts settled prior to contract maturity. Adjusted EBITDAX is not a measure of net income (loss) as determined by GAAP. Our accounting predecessor, Roan LLC, passed through its taxable income to its owners for income tax purposes and thus, the Company did not incur historical income tax expenses.

The Company believes Adjusted EBITDAX is useful because it allows our management to more effectively evaluate the operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. The Company adds the items listed above to net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX.

Roan’s computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies or to such measure in our revolving credit facility or any of our other contracts.

The following tables present a reconciliation of Adjusted EBITDAX to net income (loss), our most directly comparable financial measure calculated and presented in accordance with GAAP for each of the periods indicated.

 

Reconciliation of Net Income (Loss) to Adjusted EBITDAX

 

 

Three Months Ended June 30,

 

2019

 

2018

 

(in thousands)

 

 

 

 

Net income (loss)

$

27,246

 

 

$

(22,757

)

Adjusted for

 

 

 

Interest

8,462

 

 

1,087

 

Income tax expense

13,410

 

 

 

Depreciation, depletion, amortization and accretion

44,893

 

 

24,601

 

Exploration expense

11,406

 

 

10,633

 

Non-cash equity-based compensation

(3,222

)

 

2,835

 

Aborted offering costs

2,155

 

 

 

Severance and employee matters

687

 

 

 

Allowance for doubtful accounts

3,857

 

 

 

Loss on sale of other assets

50

 

 

 

(Gain) loss on derivative contracts

(37,054

)

 

54,602

 

Cash received (paid) upon settlement of derivative contracts

7,361

 

 

(9,773

)

Adjusted EBITDAX

$

79,251

 

 

$

61,228

 

 

 

 

 

 

Six Months Ended June 30,

 

2019

 

2018

 

(in thousands)

 

 

 

 

Net (loss) income

$

(30,810

)

 

$

12,324

 

Adjusted for

 

 

 

Interest

15,206

 

 

2,886

 

Income tax benefit

(9,487

)

 

 

Depreciation, depletion, amortization and accretion

86,465

 

 

46,466

 

Exploration expense

23,894

 

 

18,483

 

Non-cash equity-based compensation

(157

)

 

5,127

 

Aborted offering costs

2,155

 

 

 

Severance and employee matters

687

 

 

 

Allowance for doubtful accounts

5,338

 

 

 

Gain on sale of other assets

(614

)

 

 

Loss on derivative contracts

46,588

 

 

64,216

 

Cash received (paid) upon settlement of derivative contracts (1)

12,743

 

 

(14,288

)

Adjusted EBITDAX

$

152,008

 

 

$

135,214

 

(1)

 

Excludes cash received upon settlement of derivative contracts prior to the original contractual maturity for the six months ended June 30, 2018

Net Debt

Net Debt is a non-GAAP financial measure equal to long-term debt outstanding on the credit facility and term loan, exclusive of any discounts or fees, less cash on hand.

Net Debt Reconciliation

($ In thousands)

2Q 2019

Credit Facility

$

659,639

Term Loan, net

 

44,924

Unamortized original issue discount on Term Loan

 

1,250

Deferred financing costs on Term Loan

 

3,826

Funded debt

$

709,639

Less: Cash

$

5,428

Net Debt

$

704,211

Cash general and administrative expenses per Boe

Cash G&A expense is a non-GAAP measure, which is defined as total general and administrative expense as determined in accordance with GAAP less equity-based compensation expense, expense for allowance for doubtful accounts, severance and employee matter expense and aborted offering costs. Cash G&A expense should not be considered as an alternative to, or more meaningful than, total general and administrative expense as determined in accordance with GAAP and may not be comparable to other companies’ similarly titled measures.

Updated Guidance as of August 7, 2019

2019

 

Full-Year Production (MBoe/d)

50.5 - 53.5

Oil Mix

25.5% - 27.5%

Liquids Mix

51.5% - 59.5%

Production Expense ($/Boe)

$2.80 - $3.10

Cash G&A ($/Boe)

$2.00 - $2.20

Production Taxes (% of Production Revenues)

5.2% - 5.4%

Total Capex

$495 - $525

 

Alyson Gilbert Investor Relations Manager 405-896-3767 IR@RoanResources.com

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