Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ:
ROSE, ROSEW, ROSEU) today announced proved reserves as of December
31, 2018, fourth quarter 2018 average net production, and a farm-in
agreement in the Southern Delaware area.
Highlights
- Increased proved reserves to 48.4 million barrels of crude oil
equivalent (“MMBOE”) (prepared by Netherland, Sewell &
Associates, Inc.) with a PV-10 of $743 million as of December 31,
2018, up 55% and 102%, respectively, from December 31, 2017 (see
the “Non-GAAP Measure” disclosure below for discussion of
PV-10)
- Proved reserve additions of 17.2 MMBOE resulted in a reserve
replacement ratio of 258% (total of extensions, discoveries, and
revisions, divided by production through third quarter 2018 and
preliminary fourth quarter 2018 estimate)
- Preliminary average net production of approximately 22,700
barrels of oil equivalent per day (“BOEPD”) (73% oil and 87% total
liquids) for the fourth quarter of 2018, an increase of 15%
compared to the third quarter of 2018; expect capital expenditures
for 2018 to fall in-line with the top-end of guidance
- Executed farm-in agreement in Southern Delaware allowing the
Company to earn up to approximately 2,200 net acres upon drilling
and completing up to seven wells by the end of 2020
- Recent installation of electric submersible pump (“ESP”) in
Southern Delaware on the Sisters 17 A001 well, increasing
production significantly from previous level
“We are very pleased to announce our 2018
year-end proved reserves and preliminary fourth quarter 2018
production, along with other key developments in our Southern
Delaware area. Our substantial increase in reserves and PV-10
are the result of the tremendous production accomplishments we made
in 2018 and the quality of our assets. The farm-in agreement
is consistent with our growth strategy and demonstrates our
enthusiasm for our Southern Delaware area and provides an
opportunity to add strategic acreage at an attractive acquisition
cost. The agreement will have no impact to our 2019 guidance
and capital plan balanced with Adjusted EBITDAX, other than a
marginal shift to our 2019 drilling activity. This additional
acreage will further block up our Southern Delaware area, allowing
for additional extended laterals and enhanced economics from our
expanding infrastructure,” stated Gary C. Hanna, Rosehill’s
Chairman and Interim President and Chief Executive Officer.
Mr. Hanna continued, “The development of our Southern Delaware
area is continuing at a rapid pace, with seven additional wells
drilled since early November. Drilling performance has
accelerated with our most recent well drilled in approximately 10
days, and the installation of an ESP on the Sisters well is
indicating encouraging early results. We are currently in the
completion stage for six wells in the Southern Delaware with early
ESP installation planned for each well and expect to have initial
results early in the second quarter.”
Reserves
The Company’s proved reserves increased 55% from December 31,
2017 to 48.4 MMBOE at December 31, 2018, consisting of 69% oil, 16%
natural gas liquids (“NGLs”) and 15% natural gas.
The PV-10 value increased to $743 million, up 102% from December
31, 2017, and determined at SEC pricing of $65.56 per barrel of oil
and $3.10 per million British thermal units (“MMBTU”) of natural
gas, prior to adjusting for quality and basis differentials.
SEC prices net of differentials were $56.55 per barrel of oil and
$1.84 per MMBTU. The Company’s additions to proved reserves
in 2018 were achieved organically with no additions attributable to
purchases. Due to the early development stage of the asset,
the Southern Delaware area contributed less than 10% to our proved
reserve estimates and PV-10 as of December 31, 2018 and is expected
to be a driver of future reserves growth.
The following table outlines the Company’s proved reserves as of
December 31, 2018:
|
|
Oil |
|
Gas |
|
NGL |
|
Total |
|
PV-10 |
Reserve
Category |
|
(MBbls) |
|
(MMcf) |
|
(MBbls) |
|
(MBoe) |
|
($ in thousands) |
Proved Developed |
|
18,464 |
|
26,194 |
|
4,477 |
|
27,307 |
|
555,444 |
Proved Undeveloped |
|
14,694 |
|
18,388 |
|
3,298 |
|
21,056 |
|
187,117 |
Total Proved |
|
33,158 |
|
44,583 |
|
7,775 |
|
48,363 |
|
742,561 |
|
Note: PV-10 is a non-GAAP financial measure. See the
“Non-GAAP Measures” disclosure below for additional
information. Table may not total due to rounding. |
Operational Update
In February the Company installed an ESP on its Sisters 17 A001
well in the Southern Delaware area that was placed on first
production in October 2018 without the aid of artificial
lift. Shortly after installation of the ESP, the well reached
production of 933 BOEPD, 89% oil or 187 BOEPD per 1,000 ft. over a
24-hour period. This level of production, which has remained
consistent, is significantly over the well’s production rates prior
to installation of the ESP and is encouraging for a well that was
placed on first production five months prior. Due to this
success, the Company is planning to install ESPs for subsequent
wells completed in the Southern Delaware.
The Company’s preliminary average net production in the fourth
quarter of 2018 was approximately 22,700 BOEPD (73% oil and 87%
total liquids). In the fourth quarter, the Company drilled
eight wells, completed three wells, and exited the year with eight
drilled uncompleted wells.
Farm-In Agreement
The Company recently executed a farm-in
agreement in its Southern Delaware area in Pecos County,
Texas. The agreement allows for the Company to earn up to
approximately 2,200 net acres upon drilling and completing up to
seven wells through 2020. The Company will provide a 25%
carry of drilling and completion cost for each of the seven wells,
along with facilities equipment. The agreement will not
result in any change to the Company’s 2019 guidance, other than a
slight shift in drilling
activity.
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.
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, 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.
Non-GAAP Measure
PV-10 is a non-GAAP financial measure and represents the
period-end present value of estimated future cash inflows from
Rosehill’s reserves, less future development and production costs,
discounted at 10% per annum to reflect timing of future cash flows
and using SEC pricing assumptions in effect at the end of the
period. PV-10 differs from standardized measure, the most directly
comparable GAAP financial measure, because it does not include the
effects of income taxes. Moreover, GAAP does not provide a measure
of estimated future net cash flows for reserves other than proved
reserves. PV-10 can be used within the industry and by
creditors and securities analysts to evaluate estimated net cash
flows from reserves on a more comparable basis. At this time,
Rosehill is unable to provide a reconciliation of PV-10 to a
standardized measure because Rosehill has not yet finalized its
calculation of the effects of income taxes for the year ended
December 31, 2018. Rosehill expects to include a full
reconciliation of PV-10 as of December 31, 2018 to standardized
measure in its Form 10-K for the year ended December 31, 2018.
Neither PV-10 nor standardized measure represents an estimate of
fair market value of Rosehill’s oil and natural gas properties.
Rosehill and others in the industry use PV-10 as a measure to
compare the relative size and value of estimated reserves held by
companies without regard to the specific tax characteristics of
such entities. The estimates for proved reserves as of
December 31, 2018 have been prepared by Netherland, Sewell &
Associates, Inc., Rosehill’s independent reserve engineers.
Contact
Information:
Gary C. Hanna |
Craig Owen |
Chairman of the Board and |
Chief Financial Officer |
Interim Chief Executive Officer |
281-675-3400 |
281-675-3400 |
|
John CrainSenior Manager, Finance and Investor Relations
281-675-3493
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