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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190807005787/en/
Alyson Gilbert Investor Relations Manager 405-896-3767
IR@RoanResources.com
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