Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ:
ROSE, ROSEW, ROSEU) today announced its 2019 guidance along with an
operational update.
Highlights
- Estimated 2019 annual production guidance of 20 – 21.5 MBoe/d
(~75% oil and 88% liquids), up over 25% compared to the midpoint of
2018 guidance;
- Estimated 2019 Adjusted EBITDAX guidance of $210 - $230
million, up over 20% compared to the midpoint of 2018 guidance;
- Planned 2019 capital guidance of $220 - $240 approximately
neutral to 2019 Adjusted EBITDAX; and
- Strong Adjusted EBITDAX and production in the fourth quarter of
2018 to date above third quarter averages and highlighted by recent
flow back results on a Z&T 32 three well pad in Loving County,
Texas; these wells targeted the Lower Wolfcamp A formation and
reached a cumulative initial production rate during a 24-hour
period of 4,927 BOEPD, 68% oil, 346 BOEPD per 1,000 ft. of
lateral
“We are building on the momentum created throughout 2018 into
the new year and are excited to release our 2019 plan. We
believe we are taking the appropriate steps to adjust our activity
level to align with the level of cash generated and believe we can
achieve impressive growth in both production and Adjusted EBITDAX
in 2019. We remain flexible and can adjust our program in
both directions in response to the dynamic environment,” stated
Gary C. Hanna, Rosehill’s Chairman and Interim President and Chief
Executive Officer. Mr. Hanna continued, “While we expect
additional funding needs are minimal, we are targeting an increase
in our liquidity position and have several potential options on
that front including a potential monetization of our water
infrastructure assets and further increases to our borrowing
base. We have the benefit of a robust hedge portfolio,
highlighted by oil hedges covering over 85% of expected 2019
production at the midpoint of guidance with an average floor of
approximately $55 per barrel. Our hedge book value reached
approximately $100 million this week.”
“We continue to see strong results from our
activities in Loving County including the results of an additional
three well pad on the Z&T 32 lease. In our Southern
Delaware area, we recently finished the drilling of a three well
pad on the State Blanco lease and have commenced the drilling of a
two well pad on the Trees Estate lease, and now have drilled eight
wells in this area. We plan to begin completion operations on
these wells in January 2019 and look forward to sharing production
results once available.”
2019 Guidance
Rosehill’s projections for the upcoming year ended December 31,
2019 are provided below. The 2019 guidance assumes the
Company will utilize a one and a half rig drilling program on
average. The Company expects to drill between 25 and 29 wells in
2019, complete between 24 and 28 wells with approximately
two-thirds of the program directed toward our Loving County assets.
The Company expects to exit 2019 with eight to ten drilled
uncompleted wells (“DUCs”), roughly flat to the current DUC count.
|
|
|
2019 Guidance |
Price Assumptions WTI/HH(1) |
$55 / $2.75 |
|
|
Production (BOEPD) |
20,000 - 21,500 |
|
|
Adjusted EBITDAX ($MM)(2) |
$210 - $230 |
|
|
Total Capital ($MM)(3) |
$220 - $240 |
|
|
Debt/Adjusted EBITDAX |
1.4x - 1.6x |
|
|
(1) Amounts represents WTI crude and Henry Hub natural
gas prices utilized for projections. NGLs estimated at 35% of
WTI.(2) Adjusted EBITDAX is a non-GAAP financial measure. For
a discussion of Adjusted EBITDAX and a reconciliation to its
nearest GAAP measure, please see “Non-GAAP Measures.”(3)
Approximately 75% of total capital is drilling and completion with
remainder consisting primarily of facilities capital. |
|
A $10 per barrel decrease in average 2019 WTI prices from the
guidance assumption of $55 per barrel impacts Adjusted EBITDAX by
approximately $10 million and highlights our strong hedge position.
Liquidity Update
In early December the lenders in the Company’s Senior Secured
Facility approved an increase to the borrowing base to $220
million. The borrowing base evaluation utilized reserve data
as of September 30, 2018 and was impacted by minimal reserve
additions from wells in the Southern Delaware area. The
Company expects an increase in reserve contribution in the future
from the Southern Delaware area due to ongoing development
plans. The Company expects to exit 2018 with liquidity of
approximately $50 million, consisting of availability under its
Senior Secured Facility and cash on hand, and will look to further
enhance this amount through the options previously described.
About Rosehill Resources
Inc.
Rosehill Resources Inc. is an oil and gas
exploration company with producing assets in Texas and New Mexico
with its investment activity focused in the Delaware Basin portion
of the Permian Basin. The Company’s strategy for growth includes
the organic development of its two core acreage areas in the
Northern Delaware Basin and the Southern Delaware basin, as well as
focused acquisitions in the Delaware Basin.
Non-GAAP Measures
Adjusted EBITDAX
Adjusted EBITDAX is a supplemental non-GAAP
financial measure that is used by Rosehill’s management and
external users of Rosehill’s financial statements, such as industry
analysts, investors, lenders and rating agencies. The Company
defines Adjusted EBITDAX as net income (loss) before interest
expense, income taxes, depreciation, depletion, and amortization,
accretion and impairment of oil and natural gas properties, (gains)
losses on commodity derivatives excluding net cash receipts
(payments) on settled commodity derivatives, gains and losses from
the sale of assets, exploration costs, transaction costs incurred
in connection with the Transaction and other non-cash operating
items. Adjusted EBITDAX is not a measure of net income as
determined by United States generally accepted accounting
principles (“U.S. GAAP”).
Management believes Adjusted EBITDAX is useful
because it allows for more effective evaluation and comparison of
Rosehill’s operating performance and results of operations from
period to period without regard to the Company’s financing methods
or capital structure. Rosehill excludes the items listed above from
net income in arriving at Adjusted EBITDAX because these amounts
can vary substantially from company to company within the 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 as determined
in accordance with U.S. GAAP or as an indicator of the Company’s
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. Rosehill’s computations of Adjusted EBITDAX may not be
comparable to other similarly titled measures of other
companies.
Forward-Looking Statements
This communication includes certain statements
that may constitute “forward-looking statements” for purposes of
the federal securities laws. All statements, other than statements
of historical fact included in this communication, regarding
Rosehill’s opportunities in the Delaware Basin, strategy, future
operations, financial position, estimated results of operations,
future earnings, future capital spending plans, prospects, plans
and objectives of management are forward-looking statements. When
used in this communication, the words “could,” “believe,”
“anticipate,” “intend,” “estimate,” “expect,” “project,”
“guidance,” “forecast” and similar expressions are intended to
identify forward-looking statements, although not all
forward-looking statements contain such identifying words.
You should not place undue reliance on these
forward-looking statements. Although the Company believes that the
plans, intentions and expectations reflected in or suggested by the
forward-looking statements in this communication are reasonable, no
assurance can be given that these plans, intentions or expectations
will be achieved or occur, and actual results could differ
materially and adversely from those anticipated or implied by the
forward-looking statements. Some factors that could cause actual
results to differ include, but are not limited to, the Company’s
ability to consummate the acquisition, the ultimate timing, outcome
and results of integrating the acquired assets into its business
and its ability to realize the anticipated benefits, commodity
price volatility, inflation, lack of availability of drilling and
completion equipment and services, environmental risks, drilling
and other operating risks, regulatory changes, the uncertainty
inherent in estimating oil and natural gas reserves and in
projecting future rates of production, cash flow and access to
capital, the timing of development expenditures and the other risks
and uncertainties discussed under Risk Factors in the Company’s
Form 10-K, and in other public filings with the Securities and
Exchange Commission (the “SEC”) by the Company. The Company’s SEC
filings are available publicly on the SEC’s website at www.sec.gov.
These forward-looking statements are based on management’s current
expectations and assumptions about future events and are based on
currently available information as to the outcome and timing of
future events. All forward-looking statements speak only as of the
date of this communication. Except as otherwise required by
applicable law, the Company disclaims 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 communication.
Contact
Information:
Gary C. HannaChairman of the Board andInterim Chief Executive
Officer281-675-3400
Craig OwenChief Financial Officer281-675-3400
John CrainSenior Manager, Finance and Investor Relations
281-675-3493
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