Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ:
ROSE, ROSEW, ROSEU) today reported operational and financial
results for the third quarter of 2018 and recent key items.
Third Quarter 2018 Highlights and Recent Key
Items:
- Grew average net production to 19,750 barrels of oil equivalent
per day (“BOEPD”) (73% oil and 87% total liquids) for the third
quarter of 2018, an increase of 7% compared to the second quarter
of 2018
- Reported a net loss attributable to Rosehill of $31.4 million,
or $4.76 per share, for the three months ended September 30, 2018,
which included a $62.3 million non-cash, pre-tax loss on commodity
derivative instruments
- Delivered Adjusted EBITDAX (a non-GAAP measure defined and
reconciled below) of $56.7 million for the third quarter of 2018,
an increase of 15% over the second quarter of 2018
- Reduced combined lease operating and general and administrative
expenses, excluding stock-based compensation, per barrel of oil
equivalent (“BOE”) by $1.81, or 18%, compared to second quarter of
2018
- Encouraging early results in Southern Delaware with first four
wells averaging initial production (“IP”) 24 rates of 956 BOEPD,
86% oil, or 198 BOEPD per 1,000 ft. Actions are underway to
implement artificial lift across Southern Delaware wells that are
expected to significantly increase future IP 24 ranges to at least
1,150 to 1,350 BOEPD, or 240 to 275 BOEPD per 1,000 ft.
- Entered into new transportation agreement in Southern Delaware
providing ample flow assurance and future flexibility; amended
transportation agreement in Northern Delaware resulting in greater
flow assurance and improved margins
- Completed equity offering launched in late September, tripling
the Company’s unaffiliated public float with modest overall
dilution
Gary C. Hanna, Rosehill’s Chairman and Interim
President and Chief Executive Officer, commented, “During the third
quarter we continued our progress toward executing our plan for
2018, most notably by achieving another quarter of impressive cash
flow and production growth, as well as by exceeding a production
milestone of 20,000 BOEPD in early September. Along with this
growth in the third quarter, the Company maintained a focus on cost
management that resulted in a $1.81, or 18%, decrease in combined
lease operating and cash general and administrative expenses per
BOE compared to the second quarter of 2018. When comparing to the
first quarter of 2018, we have reduced combined lease operating and
cash general and administrative expenses per BOE by $4.65, or
35%.
“We are also pleased to provide an update on
progress in our Southern Delaware area. We are encouraged by the
production results associated with the initial wells drilled and
are looking forward to applying our learnings to the future
development of the asset. The extensive data we have gathered so
far, including initial seismic results as well as log and coring
analysis, is confirming our original expectations. We have made
progress in the buildout of our water and midstream infrastructure
in Southern Delaware, and now have the necessary transportation
agreements in place to move our product to market at an attractive
cost. We look forward to maintaining this momentum through the end
of the year and driving value for our shareholders.”
Operational Results
For the third quarter of 2018, the Company’s net
production averaged 19,750 BOEPD, a 7% increase compared to the
average for the second quarter of 2018, comprised of 14,370 barrels
of oil per day, 2,750 barrels of natural gas liquids (“NGLs”) per
day and 15.8 million cubic feet of gas (“MMCF”) per day. Rosehill
operated two rigs, drilled seven gross horizontal wells and
completed ten wells in the third quarter of 2018 and had three
drilled uncompleted wells (“DUCs”) at the end of the third quarter
of 2018. The Company also drilled and completed two salt water
disposal (“SWD”) wells during the third quarter of 2018 that
contributed to the overall per unit decrease in lease operating
expense.
In August, the Company began flowback on a four
well pad on the Weber 26 lease in Loving County, with the wells
producing from three separate landing zones including the Lower
Wolfcamp A, Wolfcamp A X/Y, and 3rd Bone Springs Sand. These wells
reached average IP 30 rates of 1,370 BOEPD, 80% oil, or 301 BOEPD
per 1,000 feet.
In late September, the Company began flowback on
the Kyle 26 E007 located in Loving County targeting the 2nd Bone
Springs Sand formation. The Kyle 26 E007 well reached an IP 24 of
1,396 BOEPD, 78% oil, or 285 BOEPD per 1,000 feet.
Financial Results
For the third quarter of 2018, the Company
reported net loss attributable to Rosehill of $31.4 million, or
$4.76 per share, as compared to net income of $9.2 million, or a
$0.32 loss per diluted share, in the second quarter of 2018. The
third quarter of 2018 included a$62.3 million non-cash, pre-tax
loss on commodity derivative instruments compared to a $10.8
million non-cash, pre-tax loss on commodity derivative instruments
in the second quarter of 2018.
Adjusted EBITDAX totaled $56.7 million for the
third quarter of 2018, as compared to $49.2 million in the second
quarter of 2018. This increase of 15% was driven primarily by
higher production and lower per unit operating expenses.
For the third quarter of 2018, average realized
prices (all prices excluding the effects of derivatives) were
$55.07 per barrel of oil, $1.82 per Mcf of natural gas and $28.16
per barrel of NGLs, resulting in a total equivalent price of $45.44
per BOE, down 5% from the second quarter of 2018.
Rosehill’s cash operating costs for the third
quarter of 2018 were $11.47 per BOE, which includes lease operating
expenses (“LOE”), gathering and transportation, production taxes
and general and administrative expenses (“G&A”) and excludes
costs associated with stock-based compensation. Third quarter cash
operating costs per BOE decreased 14% as compared to second
quarter, primarily attributable to reduced LOE and G&A.
During the third quarter of 2018, Rosehill
incurred capital costs, excluding asset retirement costs, of $93.5
million, which included$24.2 million and $0.8 million related to
facilities and leasehold acquisition, respectively.
Development Update
During the third quarter of 2018 the Company
brought three wells online in the Southern Delaware area, with a
fourth well brought online in October 2018. The production results
from these wells represent the first results for the Company in the
Southern Delaware area. The company is currently drilling on a
three well pad in the Southern Delaware area and expects to drill
between three and five wells in the fourth quarter.
Initial findings in the early development of the
Southern Delaware area include a high oil content, extensive
natural fracturing, and strong formation conductivity. The wells
drilled to date have averaged 86% oil and 14% wet gas and have
initially been placed online without the assistance of artificial
lift. Based on the reservoir pressure environment and low gas-oil
ratio conditions, the Company believes future well performance will
be enhanced through additional optimization steps and has begun
preparations to test various artificial lift solutions. Production
optimization steps currently in process on the initial wells
drilled include gas lift and electric submersible pumps. Based on
the results of the Company’s testing of artificial lift solutions
after initial production, the Company is accelerating the
installation of artificial lift on future wells drilled in the area
in order to optimize production and value creation. The following
table presents, for the four wells brought on line to date, an
average of the actual initial peak production results achieved
without the utilization of artificial lift and a range of the
potential initial peak production results we would have expected
had artificial lift been utilized initially.
|
Natural Flow |
|
Artificial Lift |
|
|
IP24 Peak Rate
BOEPD |
IP24 per 1,000
ft. Lateral |
|
IP24 Peak Rate
BOEPD |
IP24 per 1,000
ft. Lateral |
Oil
% |
Average of 4 wells |
956 |
198 |
Potential* |
1,150 -
1,350 |
240 - 275 |
86% |
*Based on an expected range of 20-40% increase
Logging and coring work on the initial wells
have revealed the presence of extensive natural fracturing within
certain portions of the acreage that could result in more effective
completion and stimulation of wells. As previously announced, the
Company participated in a 3D seismic survey and has received
preliminary seismic volume. The Company is expecting to receive the
fully processed data in the fourth quarter of 2018. Once fully
integrated with core and wireline data from the initial wells, the
processed data is expected to improve development of the acreage
through optimized lateral placement across the Southern Delaware
acreage.
The Company continued the buildout of its
facilities infrastructure during the third quarter in both the
Northern and Southern Delaware areas in order to lower cost and
allow for optimal well flowback conditions. The Company brought
online one SWD well in the Northern Delaware area and one SWD well
in the Southern Delaware area, increasing its disposal capacity by
35,000 barrels of water per day (“BWPD”) to a total of 155,000 BWPD
across both operating areas. The Company has several additional SWD
wells in the permitting process and will plan to bring these wells
online subject to the timing of the overall development plan in
each operating area.
Capital Structure and
Liquidity
As of September 30, 2018, Rosehill had $11
million in cash on hand and $288 million in long-term debt. As of
September 30, 2018, total liquidity, when adjusting for the
Company’s September equity offering that closed in October, was
approximately $116 million which included cash on hand, proceeds
received from our equity offering, availability under the revolving
credit facility and the Company’s ability to issue an additional
$50 million of Series B preferred stock (subject to certain
conditions). The Company elected to pursue a borrowing base
redetermination using reserve data as of September 30, 2018 and
this process is currently underway. The Company is anticipating
completing the redetermination process in November and expects the
borrowing base to increase.
Transportation & Hedging
Update
The Company recently entered into additional
transportation and marketing arrangements to ensure its products
are moved to end markets at favorable economic terms. The Company
entered into an agreement with Oryx Midstream Services for pipeline
transportation of oil production from its Southern Delaware
operating area. The agreement is structured as a multi-year acreage
dedication with increasing volume capacities and will allow for
delivery to various in-basin markets as well as optionality for
future delivery to downstream markets. The Company also entered
into a marketing contract with Plains Midstream for production
associated with the majority of its acreage in Loving County, Texas
resulting in greater flow assurance and lower transportation cost.
The agreement also provides optionality for sales to various other
markets. Neither of these agreements contain minimum volume
commitments.
Included below is a summary of the Company’s
derivative contracts as of September 30, 2018. Subsequent to
September 30, 2018 and through November 7, 2018, the Company
entered into additional derivative contracts, including
approximately 1.0 million barrels of WTI swaps that settle in 2020
at an average price of $68.66, approximately 1.8 million barrels of
WTI swaps that settle in 2021 at an average price of $63.36, and
approximately 0.8 million barrels of WTI swaps that settle in 2022
at an average price of $61.53.
Commodity Hedging
As of September 30, 2018, the Company had the following
outstanding derivative contracts:
|
|
2018 |
|
2019 |
|
2020 |
|
2021 |
|
2022 |
Commodity derivative swaps |
Oil: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Bbls) |
699,000 |
|
|
2,664,000 |
|
|
960,000 |
|
|
360,000 |
|
|
300,000 |
|
|
Weighted average fixed price ($/Bbl) |
$ |
55.15 |
|
|
$ |
53.59 |
|
|
$ |
51.16 |
|
|
$ |
50.42 |
|
|
$ |
50.12 |
|
Natural gas: |
|
|
|
|
|
|
|
|
|
|
Notional volume (MMBtu) |
960,000 |
|
|
2,220,000 |
|
|
1,500,000 |
|
|
1,200,000 |
|
|
1,200,000 |
|
|
Weighted average fixed price ($/MMbtu) |
$ |
3.02 |
|
|
$ |
2.88 |
|
|
$ |
2.84 |
|
|
$ |
2.85 |
|
|
$ |
2.87 |
|
Ethane: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Gallons) |
2,523,528 |
|
|
12,444,138 |
|
|
— |
|
|
— |
|
|
— |
|
|
Weighted average fixed price ($/Gallons) |
$ |
0.35 |
|
|
$ |
0.28 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Propane: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Gallons) |
1,682,352 |
|
|
8,296,218 |
|
|
— |
|
|
— |
|
|
— |
|
|
Weighted average fixed price ($/Gallons) |
$ |
0.97 |
|
|
$ |
0.79 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Pentanes: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Gallons) |
560,700 |
|
|
2,765,700 |
|
|
— |
|
|
— |
|
|
— |
|
|
Weighted average fixed price ($/Gallons) |
$ |
1.53 |
|
|
$ |
1.47 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative two-way
collars |
Oil: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Bbls) |
182,000 |
|
|
601,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
Weighted average ceiling price ($/Bbl) |
$ |
61.28 |
|
|
$ |
61.30 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Weighted average floor price ($/Bbl) |
$ |
57.53 |
|
|
$ |
55.21 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative three-way
collars |
Oil: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Bbls) |
— |
|
|
1,531,832 |
|
|
3,294,000 |
|
|
— |
|
|
— |
|
|
Weighted average ceiling price ($/Bbl) |
$ |
— |
|
|
$ |
68.52 |
|
|
$ |
70.29 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Weighted average floor price ($/Bbl) |
$ |
— |
|
|
$ |
57.62 |
|
|
$ |
57.50 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Weighted average sold put option price ($/Bbl) |
$ |
— |
|
|
$ |
45.51 |
|
|
$ |
47.50 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil basis swaps |
Midland / Cushing: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Bbls) |
920,000 |
|
|
4,800,832 |
|
|
3,513,600 |
|
|
— |
|
|
— |
|
|
Weighted average fixed price ($/Bbl) |
$ |
(4.95 |
) |
|
$ |
(4.93 |
) |
|
$ |
(1.43 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Argus WTI roll: |
|
|
|
|
|
|
|
|
|
|
Notional volume (Bbls) |
920,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Weighted average fixed price ($/Bbl) |
$ |
1.14 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas basis swaps |
EP Permian |
|
|
|
|
|
|
|
|
|
|
Notional volume (MMBtu) |
— |
|
|
1,781,472 |
|
|
2,096,160 |
|
|
— |
|
|
— |
|
|
Weighted average fixed price ($/MMBtu) |
$ |
— |
|
|
$ |
(1.03 |
) |
|
$ |
(1.03 |
) |
|
$ |
— |
|
|
$ |
— |
|
Conference Call, Webcast and Presentation
The Company will hold a conference call to
discuss its second quarter financial and operating results on
Friday, November 9, 2018, at 10:00 a.m. Central Time (11:00 a.m.
Eastern Time). Interested parties may participate by dialing (866)
601-1105 from the United States or (430) 775-1347 from outside the
United States. The conference call I.D. number is 1356048. The call
will also be available as a live webcast on the “News/Events” tab
of the Investors section of the Company’s website,
www.rosehillresources.com. The webcast will be available for replay
for at least 30 days. An updated investor presentation in
conjunction with this earnings release will be available on the
Company’s website under the Investor Relations section.
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.
Rosehill Resources Inc. |
Operational Highlights |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues: (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Oil
sales |
$ |
72,799 |
|
$ |
11,435 |
|
$ |
197,414 |
|
$ |
36,464 |
|
Natural
gas sales |
|
2,633 |
|
|
1,881 |
|
|
6,686 |
|
|
5,592 |
|
NGL
sales |
|
7,125 |
|
|
1,979 |
|
|
14,770 |
|
|
5,405 |
|
Total
revenues |
$ |
82,557 |
|
$ |
15,295 |
|
$ |
218,870 |
|
$ |
47,461 |
|
Average sales price (1): |
|
|
|
|
Oil (per
Bbl) |
$ |
55.07 |
|
$ |
44.32 |
|
$ |
58.32 |
|
$ |
45.92 |
|
Natural
gas (per Mcf) |
|
1.82 |
|
|
2.57 |
|
|
1.87 |
|
|
2.68 |
|
NGLs
(per Bbl) |
|
28.16 |
|
|
18.32 |
|
|
23.98 |
|
|
17.32 |
|
Total
(per Boe) |
$ |
45.44 |
|
$ |
31.41 |
|
$ |
47.61 |
|
$ |
32.64 |
|
Total,
including effects of gain (loss) on settled commodity derivatives,
net (per Boe) |
$ |
42.68 |
|
$ |
32.38 |
|
$ |
43.87 |
|
$ |
32.75 |
|
Net Production: |
|
|
|
|
Oil
(MBbls) |
|
1,322 |
|
|
258 |
|
|
3,385 |
|
|
794 |
|
Natural
gas (MMcf) |
|
1,450 |
|
|
732 |
|
|
3,577 |
|
|
2,089 |
|
NGLs
(MBbls) |
|
253 |
|
|
108 |
|
|
616 |
|
|
312 |
|
Total
(MBoe) |
|
1,817 |
|
|
487 |
|
|
4,597 |
|
|
1,454 |
|
Average daily net production volume: |
|
|
|
|
Oil
(Bbls/d) |
|
14,370 |
|
|
2,801 |
|
|
12,399 |
|
|
2,908 |
|
Natural
gas (Mcf/d) |
|
15,761 |
|
|
7,958 |
|
|
13,103 |
|
|
7,651 |
|
NGLs
(Bbls/d) |
|
2,750 |
|
|
1,169 |
|
|
2,256 |
|
|
1,144 |
|
Total
(Boe/d) |
|
19,750 |
|
|
5,296 |
|
|
16,839 |
|
|
5,327 |
|
Average costs (per BOE): |
|
|
|
|
Lease
operating expense |
$ |
5.07 |
|
$ |
6.05 |
|
$ |
6.38 |
|
$ |
4.46 |
|
Production taxes |
|
2.22 |
|
|
1.45 |
|
|
2.29 |
|
|
1.50 |
|
Gathering and transportation |
|
0.73 |
|
|
1.71 |
|
|
0.71 |
|
|
1.60 |
|
Depreciation, depletion and amortization |
|
26.12 |
|
|
17.21 |
|
|
22.79 |
|
|
17.98 |
|
Exploration costs |
|
0.74 |
|
|
0.89 |
|
|
0.80 |
|
|
0.83 |
|
General
and administrative expense, excluding stock-based compensation |
|
3.45 |
|
|
10.05 |
|
|
3.92 |
|
|
5.89 |
|
Stock
based compensation |
|
1.14 |
|
|
0.36 |
|
|
1.17 |
|
|
0.12 |
|
Transaction expenses |
|
— |
|
|
0.31 |
|
|
— |
|
|
1.80 |
|
(Gain)
loss on sale of property and equipment |
|
0.02 |
|
|
— |
|
|
0.07 |
|
|
(0.01 |
) |
Total
(per Boe) |
$ |
39.49 |
|
$ |
38.03 |
|
$ |
38.13 |
|
$ |
34.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excluding the effects of realized and unrealized commodity
derivative transactions unless noted otherwise
ROSEHILL RESOURCES
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In thousands,
except per share amounts)
|
|
Three Months |
|
Nine Months |
|
|
Ended September
30, |
|
Ended September
30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenues: |
|
|
|
|
|
|
|
|
Oil sales |
|
$ |
72,799 |
|
|
$ |
11,435 |
|
|
$ |
197,414 |
|
|
$ |
36,464 |
|
Natural gas sales |
|
2,633 |
|
|
1,881 |
|
|
6,686 |
|
|
5,592 |
|
Natural gas liquids sales |
|
7,125 |
|
|
1,979 |
|
|
14,770 |
|
|
5,405 |
|
Total revenues |
|
82,557 |
|
|
15,295 |
|
|
218,870 |
|
|
47,461 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Lease operating expenses |
|
9,205 |
|
|
2,944 |
|
|
29,315 |
|
|
6,479 |
|
Production taxes |
|
4,034 |
|
|
707 |
|
|
10,515 |
|
|
2,174 |
|
Gathering and transportation |
|
1,327 |
|
|
835 |
|
|
3,246 |
|
|
2,329 |
|
Depreciation, depletion, amortization and
accretion |
|
47,469 |
|
|
8,383 |
|
|
104,784 |
|
|
26,150 |
|
Exploration costs |
|
1,348 |
|
|
434 |
|
|
3,659 |
|
|
1,208 |
|
General and administrative |
|
8,342 |
|
|
5,069 |
|
|
23,369 |
|
|
8,738 |
|
Transaction costs |
|
— |
|
|
149 |
|
|
— |
|
|
2,618 |
|
(Gain) loss on disposition of property and
equipment |
|
29 |
|
|
— |
|
|
325 |
|
|
(11 |
) |
Total operating expenses |
|
71,754 |
|
|
18,521 |
|
|
175,213 |
|
|
49,685 |
|
Operating income |
|
10,803 |
|
|
(3,226 |
) |
|
43,657 |
|
|
(2,224 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense, net |
|
(5,363 |
) |
|
(300 |
) |
|
(13,892 |
) |
|
(1,274 |
) |
Gain (loss) on commodity derivative instruments,
net |
|
(67,314 |
) |
|
(1,451 |
) |
|
(108,553 |
) |
|
1,751 |
|
Other income (expense), net |
|
(93 |
) |
|
(148 |
) |
|
329 |
|
|
(105 |
) |
Total other income (expense), net |
|
(72,770 |
) |
|
(1,899 |
) |
|
(122,116 |
) |
|
372 |
|
Loss before income taxes |
|
(61,967 |
) |
|
(5,125 |
) |
|
(78,459 |
) |
|
(1,852 |
) |
Income tax expense (benefit) |
|
22,923 |
|
|
(923 |
) |
|
5,523 |
|
|
(650 |
) |
Net income (loss) |
|
(84,890 |
) |
|
(4,202 |
) |
|
(83,982 |
) |
|
(1,202 |
) |
Net income (loss) attributable to noncontrolling interest |
|
(61,450 |
) |
|
(5,680 |
) |
|
(83,873 |
) |
|
(8,009 |
) |
Net income attributable to Rosehill Resources Inc. before preferred
stock dividends |
|
(23,440 |
) |
|
1,478 |
|
|
(109 |
) |
|
6,807 |
|
Series A Preferred Stock dividends and deemed dividends |
|
2,011 |
|
|
1,942 |
|
|
5,907 |
|
|
10,014 |
|
Series B Preferred Stock dividends, deemed dividends, and
return |
|
5,917 |
|
|
— |
|
|
17,494 |
|
|
— |
|
Net income (loss) attributable to Rosehill Resources Inc.
common stockholders |
|
$ |
(31,368 |
) |
|
$ |
(464 |
) |
|
$ |
(23,510 |
) |
|
$ |
(3,207 |
) |
Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(4.76 |
) |
|
$ |
(0.08 |
) |
|
$ |
(3.66 |
) |
|
$ |
(0.55 |
) |
Diluted |
|
$ |
(4.76 |
) |
|
$ |
(0.08 |
) |
|
$ |
(3.66 |
) |
|
$ |
(0.55 |
) |
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
6,592 |
|
|
5,857 |
|
|
6,416 |
|
|
5,857 |
|
Diluted |
|
6,592 |
|
|
5,857 |
|
|
6,416 |
|
|
5,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROSEHILL RESOURCES
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)(In thousands,
except per share amounts)
|
|
|
|
|
|
|
|
September
30,2018 |
|
|
December 31,2017 |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
$ |
11,001 |
|
|
$ |
20,677 |
Restricted cash |
|
— |
|
|
|
4,005 |
Accounts receivable |
|
23,299 |
|
|
|
1,527 |
Accounts
receivable, related parties |
|
16,662 |
|
|
|
16,022 |
Prepaid
and other current assets |
|
1,488 |
|
|
|
1,312 |
Total
current assets |
|
52,450 |
|
|
|
43,543 |
Property and equipment: |
Oil and
natural gas properties (successful efforts), net |
|
630,386 |
|
|
|
431,332 |
Other
property and equipment, net |
|
2,472 |
|
|
|
1,283 |
Total
property and equipment, net |
|
632,858 |
|
|
|
432,615 |
Other
assets, net |
|
4,448 |
|
|
|
824 |
Total assets |
$ |
689,756 |
|
|
$ |
476,982 |
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
Accounts
payable |
$ |
23,226 |
|
|
$ |
31,868 |
Accounts
payable, related parties |
|
12 |
|
|
|
223 |
Derivative liabilities |
|
53,263 |
|
|
|
10,772 |
Accrued
liabilities and other |
|
31,753 |
|
|
|
15,492 |
Accrued
capital expenditures |
|
43,010 |
|
|
|
45,045 |
Total
current liabilities |
|
151,264 |
|
|
|
103,400 |
Long-term liabilities: |
|
|
Long-term
debt, net |
|
288,013 |
|
|
|
93,199 |
Asset
retirement obligations, net of current portion |
|
13,037 |
|
|
|
8,522 |
Deferred
tax liabilities |
|
5,676 |
|
|
|
— |
Derivative liabilities |
|
56,825 |
|
|
|
8,008 |
Other |
|
154 |
|
|
|
321 |
Total
long-term liabilities |
|
363,705 |
|
|
|
110,050 |
Total liabilities |
|
514,969 |
|
|
|
213,450 |
Mezzanine equity |
|
|
Series B
Preferred Stock, $0.0001 par value, 10.0% Redeemable, $1,000 per
share liquidation preference; of the 1,000,000 shares of Preferred
Stock authorized, 210,000 shares designated, 155,180 and 150,626
shares issued and outstanding as of September 30, 2018 and December
31, 2017, respectively |
|
151,535 |
|
|
|
140,868 |
Stockholders’ equity |
Series A
Preferred Stock, $0.0001 par value, 8.0% Cumulative Perpetual
Convertible, $1,000 per share liquidation preference; of the
1,000,000 shares of Preferred Stock authorized, 150,000 shares
designated, 100,653 and 97,698 shares issued and outstanding as of
September 30, 2018 and December 31, 2017, respectively |
|
83,615 |
|
|
|
80,660 |
Class A
Common Stock; $0.0001 par value, 250,000,000 and 95,000,000 shares
authorized at September 30, 2018 and December 31, 2017,
respectively, and 6,740,852 and 6,222,299 shares issued and
outstanding as of September 30, 2018 and December 31, 2017,
respectively |
|
1 |
|
|
|
1 |
Class B
Common Stock; $0.0001 par value, 30,000,000 shares authorized,
29,807,692 shares issued and outstanding as of September 30, 2018
and December 31, 2017 |
|
3 |
|
|
|
3 |
Additional paid-in capital |
|
7,264 |
|
|
|
29,946 |
Retained
earnings (deficit) |
|
(109 |
) |
|
|
— |
Total
common stockholders’ equity |
|
7,159 |
|
|
|
29,950 |
Noncontrolling interest |
|
(67,522 |
) |
|
|
12,054 |
Total stockholders' equity |
|
23,252 |
|
|
|
122,664 |
Total liabilities, mezzanine and stockholders’
equity |
$ |
689,756 |
|
|
$ |
476,982 |
|
|
|
|
|
|
|
ROSEHILL RESOURCES
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(In thousands)
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net
income |
$ |
(83,982 |
) |
|
$ |
(1,202 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
Depreciation, depletion, amortization and accretion |
|
104,784 |
|
|
|
26,150 |
|
Impairment of oil and gas properties |
|
— |
|
|
|
— |
|
Deferred
income taxes |
|
5,523 |
|
|
|
(650 |
) |
Stock-based compensation |
|
5,364 |
|
|
|
175 |
|
(Gain)
loss on sale of fixed assets |
|
325 |
|
|
|
(11 |
) |
(Gain)
loss on derivative instruments |
|
108,500 |
|
|
|
(1,382 |
) |
Net cash
received (paid) in settlement of derivative instruments |
|
(17,193 |
) |
|
|
19 |
|
Amortization of debt issuance costs |
|
1,723 |
|
|
|
168 |
|
Settlement of asset retirement obligations |
|
(551 |
) |
|
|
(725 |
) |
Changes
in operating assets and liabilities: |
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable and accounts receivable,
related parties |
|
(22,412 |
) |
|
|
122 |
|
(Increase) decrease in prepaid and other assets |
|
(176 |
) |
|
|
(462 |
) |
Increase
(decrease) in accounts payable and accrued liabilities and
other |
|
14,828 |
|
|
|
13,531 |
|
Increase
(decrease) in accounts payable, related parties |
|
(211 |
) |
|
|
(206 |
) |
Net cash
provided by operating activities |
|
116,522 |
|
|
|
35,527 |
|
Cash flows from investing
activities: |
|
|
|
|
|
|
|
Additions
to oil and natural gas properties |
|
(292,955 |
) |
|
|
(93,536 |
) |
Acquisition of White Wolf |
|
(4,005 |
) |
|
|
— |
|
Acquisition of land and leasehold, royalty, and mineral
interest |
|
(15,245 |
) |
|
|
(6,500 |
) |
Additions
to other property and equipment |
|
(1,834 |
) |
|
|
(343 |
) |
Proceeds
from sale of other property and equipment |
|
— |
|
|
|
46 |
|
Net cash
used in investing activities |
|
(314,039 |
) |
|
|
(100,333 |
) |
Cash flows from financing activities: |
|
|
|
|
|
Proceeds
from revolving credit facility |
|
274,000 |
|
|
|
50,000 |
|
Repayment
on revolving credit facility |
|
(80,000 |
) |
|
|
(55,000 |
) |
Proceeds
from issuance of Series A Preferred Stock and Warrants, net |
|
— |
|
|
|
95,000 |
|
Series A
Preferred Stock issuance costs |
|
— |
|
|
|
(4,220 |
) |
Net
proceeds from the Transaction |
|
— |
|
|
|
18,688 |
|
Distribution to noncontrolling interest |
|
— |
|
|
|
(40,487 |
) |
Distribution to Tema |
|
— |
|
|
|
(2,267 |
) |
Debt
issuance costs |
|
(2,497 |
) |
|
|
(661 |
) |
Dividends
paid on preferred stock |
|
(7,388 |
) |
|
|
— |
|
Restricted stock used for tax withholdings |
|
(258 |
) |
|
|
— |
|
Payment
on capital lease obligation |
|
(21 |
) |
|
|
(25 |
) |
Net cash
provided by financing activities |
|
183,836 |
|
|
|
61,028 |
|
Net
increase (decrease) in cash, cash equivalents, and restricted
cash |
|
(13,681 |
) |
|
|
(3,778 |
) |
Cash, cash equivalents, and restricted cash, beginning of
period |
|
24,682 |
|
|
|
8,434 |
|
Cash, cash equivalents, and restricted cash, end of
period |
$ |
11,001 |
|
|
$ |
4,656 |
|
|
|
|
|
|
|
|
|
ROSEHILL RESOURCES
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Continued)(Unaudited)(In
thousands)
Supplemental cash flow information and noncash
activity:
|
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017 |
Supplemental
disclosures: |
|
|
|
|
Cash paid for
interest |
|
$ |
10,160 |
|
|
$ |
246 |
|
|
|
|
|
|
Supplemental
noncash activity: |
|
|
|
|
Asset retirement
obligations incurred |
|
$ |
4,367 |
|
|
$ |
783 |
|
Net settlement of
related party receivable and payable |
|
— |
|
|
199 |
|
Changes in accrued
capital expenditures |
|
(2,035 |
) |
|
15,603 |
|
Changes in accounts
payable for capital expenditures |
|
(7,662 |
) |
|
— |
|
Series A Preferred
Stock dividends paid-in-kind |
|
2,955 |
|
|
3,314 |
|
Series A Preferred
Stock dividends declared and payable |
|
1,005 |
|
|
— |
|
Series A Preferred
Stock deemed dividend |
|
— |
|
|
6,700 |
|
Series B Preferred
Stock dividends paid-in-kind |
|
4,554 |
|
|
— |
|
Series B Preferred
Stock cash dividends declared and payable |
|
2,323 |
|
|
— |
|
Series B Preferred
Stock return |
|
5,130 |
|
|
— |
|
Series B Preferred
Stock deemed dividend |
|
984 |
|
|
— |
|
|
|
|
|
|
|
|
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.
We have provided below a reconciliation of
Adjusted EBITDAX to net loss, the most directly comparable GAAP
financial measure.
|
|
|
|
|
Three Months Ended |
|
|
September 30, |
|
June 30, |
|
September 30, |
(In
thousands) |
|
2018 |
|
2018 |
|
2017 |
Net income (loss) |
|
$ |
(84,890 |
) |
|
$ |
8,664 |
|
|
$ |
(4,202 |
) |
Interest
expense, net |
|
5,363 |
|
|
4,662 |
|
|
300 |
|
Income
tax expense (benefit) |
|
22,923 |
|
|
(15,210 |
) |
|
(923 |
) |
Depreciation, depletion, amortization and accretion |
|
47,469 |
|
|
36,506 |
|
|
8,383 |
|
(Gain)
loss on unsettled commodity derivatives, net |
|
62,315 |
|
|
10,803 |
|
|
1,923 |
|
Transaction costs |
|
— |
|
|
— |
|
|
149 |
|
Stock
settled stock based compensation |
|
2,052 |
|
|
1,760 |
|
|
175 |
|
Exploration costs |
|
1,348 |
|
|
1,875 |
|
|
434 |
|
(Gain)
loss on sale of assets |
|
29 |
|
|
163 |
|
|
— |
|
Other
(income) / expense, net |
|
105 |
|
|
(57 |
) |
|
134 |
|
Adjusted
EBITDAX |
|
$ |
56,714 |
|
|
$ |
49,166 |
|
|
$ |
6,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Hanna |
Craig Owen |
Chairman of the Board and |
Chief Financial Officer |
Interim Chief Executive Officer |
281-675-3400 |
281-675-3400 |
|
|
|
John Crain |
|
Senior Manager, Finance and Investor Relations |
|
281-675-3493 |
|
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