Roan Resources, Inc. (NYSE: ROAN) (“Roan” or the “Company”)
today announced third quarter 2018 operating and financial
results.
Third Quarter 2018 Highlights
- Reorganization process closed to form
publicly traded Roan Resources, Inc.
- Roan uplisted to the New York Stock
Exchange on November 9, 2018
- Total production increased 30% to 46.5
MBoe/d and liquids production increased 35%,
quarter-over-quarter
- 27 gross operated wells were drilled
with the addition of the eighth rig and 26 gross operated wells
were brought to first sales during the quarter
- 23 gross operated wells selected,
drilled and completed by Roan have at least 90 days of production,
average 90-day peak production rate of 1,560 Boe/d (35% oil, 67%
total liquids), normalized to 10,000-foot lateral; better targeting
efforts yield tighter distribution and improvement in production
rates
- Last quarter adjusted EBITDAX
annualized (LQA) leverage ratio of 1.3x and net debt to total
capitalization of 16%
- Year-to-date return on capital employed
(ROCE) of 9.8% and return on equity (ROE) of 10.8%
“Third quarter 2018 was a very successful quarter for Roan,”
said Tony Maranto, Roan’s Chairman and Chief Executive Officer. “We
completed the last steps to becoming a standalone public Company,
finalizing the reorganization process from our two predecessor
companies and increasing headcount to 170 full-time employees.
Additionally, operational performance from our Merge asset was
impressive with 30% production growth over second quarter 2018 and
over 100% production growth over third quarter 2017. This growth
was achieved while maintaining our strong balance sheet with LQA
leverage ratio of 1.3x and debt to capital ratio of 16%. I am
tremendously proud of our team’s accomplishments.”
Operational Update
Roan’s third quarter 2018 average daily production was
approximately 46.5 thousand barrels of oil equivalent per day
(MBoe/d) (25% oil, 56% total liquids), up 30% over second quarter
2018 with liquids production up approximately 35% over second
quarter 2018. September production was approximately 48.2 MBoe/d
(26% oil, 55% total liquids).
3Q 2017(1) 2Q 2018
3Q 2018 Production Data:
Oil (MBbls) 453 878 1,089 Natural gas (MMcf) 6,837 9,157
11,417 Natural gas liquids (MBbls) 510 883 1,286 Total volumes
(MBoe) 2,103 3,287 4,278 Average daily total volumes (MBoe/d) 22.9
36.1 46.5 (1) Pro-forma to include both Linn and Citizen
production for the full quarter
The Company drilled 27 gross (19.2 net) operated wells during
the third quarter, bringing the total drilled wells for the year to
66 gross (49.0 net) operated wells. The Company also brought online
26 gross (19.0 net) operated wells during the quarter, bringing the
year-to-date (YTD) total of wells turned online to 58 gross (44.5
net) operated wells.
3Q 2018
YTD 2018 Operated Well Data:
Drilled gross wells 27 66 Drilled net wells 19.2 49.0 Completed
gross wells 26 58 Completed net wells 19.0 44.5 Total net miles
completed 33.1 69.3
For wells turned online in the third quarter of 2018, the oil
percentage for wells with 90 days of production increased to an
average of 43%, compared to a 28% oil percentage for wells turned
online in the second quarter of 2018.
Of the 58 gross wells turned online through third quarter of
2018, 29 wells targeted the Mayes formation and 29 wells targeted
the Woodford formation. 40 of the 58 gross wells developed by Roan
and its predecessors turned online in 2018 have had at least 90
days of production with an average 90-day peak production rate of
1,428 Boe/d (32% oil, 65% total liquids) normalized to a
10,000-foot lateral, with an average lateral length of
7,500-feet.
Included in the 58 gross wells are 23 gross operated wells that
were selected, drilled and completed by Roan with at least 90 days
of production. The average 90-day peak production rate for these 23
wells is 1,560 Boe/d (35% oil, 67% total liquids) normalized to a
10,000-foot lateral, with an average lateral length of 7,685-feet.
These 23 wells are outperforming over 230 industry wells in the
Merge on average by 27%, based on cumulative production at 90 days,
which equates to approximately $1 million in additional gross
revenue per well based on $60 WTI.
“The average outperformance Roan operated wells are seeing at 90
days is a direct correlation to our emphasis on targeting,” said
Mr. Maranto. “We expect this trend to continue as more wells fully
operated by Roan reach 90 days of production and the distribution
of our operated well results continues to narrow and improve from
historical averages.”
Drill times continue to trend lower as the Company has made
numerous performance-driven adjustments since taking over the
majority of drilling operations in January of 2018. Average drill
times for two-mile Mayes wells during the third quarter were
drilled in 13.8 days, an improvement of almost 50% compared to
wells drilled in 2017. Average drill times for two-mile Woodford
wells during the third quarter were drilled in 19.2 days, an
improvement of over 35% compared to wells drilled in 2017.
Financial Update
Third quarter 2018 net loss was $301.2 million, or $1.97 per
share, and third quarter 2018 adjusted net income (non-GAAP) was
$32.2 million, or $0.21 per share. The third quarter net loss
included the impact of income tax expense of $299.7 million
attributable to the reorganization. Third quarter 2018 Adjusted
EBITDAX (non-GAAP) was $75.4 million.
See the definitions and reconciliations of adjusted net income,
adjusted net income per share, Adjusted EBITDAX 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 are provided in the supporting
tables or definitions at the conclusion of this press release.
Third quarter 2018 average realized prices were $68.86 per
barrel of oil (Bo), $21.08 per barrel of natural gas liquids (NGLs)
and $1.58 per Mcf of natural gas, resulting in a total equivalent
unhedged price of $28.09 per Boe or a total equivalent hedged price
of $24.83 per Boe.
The Company’s cash operating costs for the third quarter were
$7.28 per Boe, including lease operating expense (LOE) of $3.44 per
Boe, production tax of $1.45 per Boe and cash G&A expense
(non-GAAP) of $2.39 per Boe. LOE per Boe was higher in the third
quarter due to increased maintenance and surface repairs incurred
on previously shut in wells once Blue Mountain’s Cryogenic plant
came online. The Company expects LOE per Boe to be lower in the
fourth quarter of 2018 and in 2019. Production tax also increased
in the quarter due to new legislation on gross production tax in
Oklahoma taking effect in July of 2018.
Non-acquisition capital expenditures for third quarter 2018
totaled approximately $244.2 million, including $226.5 million for
drilling and completions and $17.7 million for other capital
expenditures. Capital expenditures for the quarter were higher due
to increased activity with adding an eighth rig and ramp in
completion activity, as well as costs attributable to wells drilled
and completed by Roan’s predecessors.
As of September 30, 2018, Roan had $3.9 million of cash on the
balance sheet and $394.6 million drawn on its revolving credit
facility. Roan currently has no other outstanding debt. The
Company’s third quarter annualized leverage ratio remained low at
1.3x. The Company also reported strong return metrics for the
quarter with ROCE at 9.8% and ROE at 10.8%.
During the third quarter of 2018, Roan entered into additional
oil and natural gas derivative contracts. A table of the Company’s
derivative contracts as of November 9, 2018 is provided at the
conclusion of this press release.
The Company completed its fall 2018 borrowing base
redetermination process for its credit facility in late September.
All participating lenders consented to a borrowing base increase to
$675 million, from $425 million.
2018 Guidance
The Company is projecting fourth quarter 2018 production to
range between 52 and 56 MBoe/d, with total liquids at approximately
57% and the fourth quarter exit rate between 58 and 62 MBoe/d.
Full-year 2018 production is expected to be between 43 and 44
MBoe/d, in-line with previous guidance.
Fourth quarter 2018 operating expenses are projected to be lower
than the third quarter results. LOE is expected to be between $2.60
and $2.90 per Boe and cash G&A (non-GAAP) is expected to be
between $2.10 and $2.40 per Boe.
Fourth quarter capital expenditures are expected to be between
$200 million and $225 million. Therefore, total capital
expenditures for 2018 are now expected to be between $760 million
and $785 million, which includes $110 million to $115 million in
other capital expenditures. This is an increase to previously
provided guidance due to costs attributable to wells drilled and
completed from the predecessor companies, adding an eighth rig
earlier than originally planned and higher completion costs as the
Company tests different completion designs.
Guidance Metric
1Q'18
Actual
2Q'18
Actual
3Q'18
Actual
4Q'18
Est.
FY'18
Est.
Total
production (MBoe/d) 37.7 36.1 46.5 52 - 56 43 - 44 Total liquids
production as % of total 56% 54% 56% ~57% ~56% LOE ($ per
Boe) $2.46 $2.14 $3.44 $2.60 - $2.90 $2.70 - $2.80 Cash G&A ($
per Boe) $3.45 $3.12 $2.39 $2.10 - $2.40 $2.67 - $2.75 Production
tax (% of revenue) 2.2% 2.5% 5.2% 5.2% - 5.3% 3.9% - 4.1%
D&C Capex ($ in MM) $103.9 $144.3 $226.5 $175 - $195 $650 -
$670 Other Capex ($ in MM) $4.8 $60.8 $17.7 $25 - $30 $110 - $115
Total Capex ($ in MM) $108.7 $205.1 $244.2 $200 - $225 $760 - $785
The Company plans to provide formal 2019 guidance with or before
year-end 2018 results early next year.
Third Quarter Earnings Conference Call
Roan will host a conference call to discuss third quarter 2018
results on Tuesday, November 13, 2018 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:
Dial-in: 866-393-4306 International dial-in: 734-385-2616
Conference ID: 6791447
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: 855-859-2056 or 404-537-3406 International replay
dial-in: 800-585-8367 Conference ID: 6791447
Upcoming Confirmed Conference Participation
Members of the Roan Management team plan to attend the following
investor conferences:
- December 4-5, 2018 Capital One 13th
Annual Energy Conference
- January 8-9, 2019 Goldman Sachs 2019
Global Energy Conference
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 Current Report on Form 8-K,
filed September 24, 2018 and any subsequently filed quarterly
reports on Form 10-Q or current reports on Form 8-K.
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,
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 and after the
Reorganization, the results of Roan Inc. For periods prior to
August 31, 2017, the date oil and natural gas properties were
contributed to us by Citizen Energy II, LLC and subsidiaries of
Linn Energy, Inc., the following financial information reflects the
results of Citizen, our accounting predecessor.
Roan Resources, Inc. Unaudited Condensed
Consolidated Statements of Operations
Three Months Ended
September 30,
Nine Months Ended
September 30,
2018 2017 2018 2017 (in thousands,
except per share amounts)
Revenues Oil sales $ 74,987 $
16,701 $ 197,356 $ 45,702 Natural gas sales 10,442 11,818 31,900
29,857 Natural gas sales - Affiliates 7,617 1,027 17,056 1,027
Natural gas liquid sales 12,983 9,224 38,127 21,199 Natural gas
liquid sales - Affiliates 14,123 850 27,250 850 (Loss) gain on
derivative contracts (36,704 ) 131
(100,920 ) 2,385 Total revenues 83,448 39,751 210,769
101,020
Operating Expenses Production expenses 14,737 4,336
30,111 10,450 Gathering, transportation and processing - 4,890 -
11,360 Production taxes 6,210 847 10,892 2,057 Exploration expenses
11,646 4,229 30,129 4,475 Depreciation, depletion, amortization and
accretion 37,164 10,824 83,630 22,176 General and administrative
13,177 4,489 40,283 22,062 Gain on sale of oil and natural gas
properties - (838 ) -
(838 ) Total operating expenses 82,934 28,777 195,045 71,742
Total operating income 514 10,974 15,724 29,278
Other
income (expense) Interest expense, net (2,092 )
(264 ) (4,978 ) (441 )
Net (loss) income before
income taxes (1,578 ) 10,710 10,746 28,837 Income tax expense
299,662 - 299,662
-
Net (loss) income $ (301,240 ) $ 10,710 $
(288,916 ) $ 28,837
Earnings (loss) per share Basic $
(1.97 ) $ 0.11 $ (1.90 ) $ 0.35 Diluted $ (1.97 ) $
0.11 $ (1.90 ) $ 0.35
Weighted average number of
shares outstanding Basic 152,540 99,859
152,129 83,578 Diluted
152,540 99,859 152,129
83,578
Roan Resources, Inc.
Unaudited Condensed Consolidated Balance Sheets
September 30, 2018 December
31, 2017 (in thousands, except par value and share data)
ASSETS Current assets Cash and cash equivalents $
3,900 $ 1,471 Accounts receivable Oil, natural gas and natural gas
liquid sales 47,365 74,527 Affiliates 14,689 4,695 Joint interest
owners and other 110,991 320 Prepaid drilling advances 49,279 -
Derivative contracts 203 152 Other current assets 6,412
930 Total current assets 232,839 82,095
Noncurrent assets Oil and natural gas properties, successful
efforts method 2,429,892 1,876,951 Accumulated depreciation,
depletion, amortization and impairment (183,557 )
(78,307 ) Oil and natural gas properties, net 2,246,335 1,798,644
Other property and equipment, net 2,935 1,147 Deferred financing
costs 4,417 2,710 Derivative contracts - 996
Total assets $ 2,486,526 $ 1,885,592
LIABILITIES AND EQUITY Current liabilities
Accounts payable and accrued liabilities $ 198,020 $ 10,245
Accounts payable and accrued liabilities - Affiliates 7,748 183,820
Revenue payable 88,029 - Drilling advances 57,374 - Derivative
contracts 64,261 9,279 Asset retirement obligations 535
- Total current liabilities 415,967 203,344
Noncurrent liabilities Long-term debt 394,639 85,339
Deferred tax liabilities 299,662 - Asset retirement obligations
12,876 10,769 Derivative contracts 18,901 1,371 Other 662
-
Total liabilities 1,142,707 300,823
Commitments and contingencies Equity Common stock,
$0.001 par value; 800,000,000 shares authorized; 152,539,532 shares
issued and outstanding at September 30, 2018 153 - Preferred stock,
$0.001 par value; 50,000,000 shares authorized; no shares issued
and outstanding at September 30, 2018 - - Additional paid-in
capital 1,643,431 - Accumulated deficit (299,765 ) - Members'
equity - 1,584,769
Total equity
1,343,819 1,584,769
Total
liabilities and equity $ 2,486,526 $ 1,885,592
Roan Resources, Inc. Unaudited Condensed
Consolidated Statements of Cash Flows
Nine Months Ended
September 30,
2018 2017 (in thousands)
Cash flows from
operating activities Net (loss) income $ (288,916 ) $ 28,837
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Depreciation, depletion, amortization and
accretion 83,630 22,176 Unproved leasehold amortization and
impairment and dry hole expense 25,642 4,475 Gain on sale of oil
and natural gas properties - (838 ) Amortization of deferred
financing costs 571 39 Amortization of deferred rent 662 - Loss
(gain) on derivative contracts 100,920 (2,385 ) Net cash (paid)
received upon settlement of derivative contracts (27,462 ) 2,385
Equity-based compensation 8,060 - Deferred income taxes 299,662 -
Other (111 ) (8 ) Changes in operating assets and liabilities
increasing (decreasing) cash: Accounts receivable - Oil, natural
gas and natural gas liquid sales 27,162 (10,820 ) Accounts
receivable - Affiliates (9,994 ) (1,877 ) Accounts receivable -
Joint interest owners and other (110,671 ) (8,410 ) Prepaid
drilling advances (55,815 ) - Other current assets (5,398 ) (1,805
) Accounts payable and accrued liabilities 37,773 37,816 Accounts
payable and accrued liabilities - Affiliates (24,474 ) 1,913
Drilling advances 57,374 (25,363 ) Revenue payable 88,029
13,113 Net cash provided by operating
activities 206,644 59,248
Cash flows from investing
activities: Acquisition of oil and natural gas properties
(22,935 ) (42,701 ) Capital expenditures for oil and natural gas
properties (485,580 ) (138,152 ) Acquisition of other property and
equipment (2,353 ) (153 ) Proceeds from sale of oil and natural gas
properties - 1,435 Purchase of investment -
(3,000 ) Net cash used in investing activities (510,868 ) (182,571
)
Cash flows from financing activities: Proceeds from
borrowings 309,300 75,340 Repayment of borrowings - (40,000 )
Deferred financing costs (2,279 ) (2,340 ) Deferred offering costs
(368 ) - Contributions from Citizen members - 95,557 Distributions
to Citizen members - (11,147 ) Net cash
provided by financing activities 306,653
117,410 Net increase (decrease) in cash and cash equivalents
2,429 (5,913 ) Cash and cash equivalents, beginning of period
1,471 6,853 Cash and cash equivalents,
end of period $ 3,900 $ 940
The following table represent the Company's
open commodity contracts at November 9, 2018:
2018 2019
2020 Total Oil fixed price swaps
Volume (bbl) 1,233,180 5,540,670 1,599,500 8,373,350
Weighted-average price per bbl $ 57.09 $ 59.86 $ 63.14 $ 60.08
Natural gas fixed price swaps Volume (mmbtu)
8,004,000 36,500,000 12,325,000 56,829,000 Weighted-average price
per mmbtu $ 2.94 $ 2.87 $ 2.63 $ 2.83
Natural gas basis
swaps(1) Volume (mmbtu) 4,600,000 21,900,000 3,640,000
30,140,000 Weighted-average price per mmbtu $ (0.54 ) $ (0.58 ) $
(0.62 ) $ (0.58 )
Natural gas liquids fixed price
swaps Volume (bbl) 230,000 912,500 - 1,142,500 Weighted-average
price per bbl $ 34.03 $ 34.03 - $ 34.03 1) Includes PEPL
contracts
Revenue from Contracts with Customers
The Company adopted ASC 606 on January 1, 2018 using a modified
retrospective approach, which only applies to contracts that were
not completed as of the date of initial application. The adoption
did not require an adjustment to opening retained earnings for the
cumulative effect adjustment. The adoption does not have a material
impact on the timing of the Company’s revenue recognition or its
financial position, results of operations, net income, or cash
flows, but does impact the Company’s presentation of revenues and
expenses under the gross-versus-net presentation guidance in ASU
2016-08.
The following table shows the impact of the adoption of ASC 606
on the Company’s current period results as compared to the previous
revenue recognition standard, ASC Topic 605, Revenue recognition
(ASC 605):
Three Months Ended
September 30, 2018
Nine Months Ended
September 30, 2018
Under ASC 606 Under ASC 605 Under
ASC 606 Under ASC 605 (in thousands)
(per Boe) (in thousands)
(per Boe) (in thousands) (per Boe) (in
thousands) (per Boe)
Revenues Oil sales $
74,987 $ 68.86 $ 75,062 $ 68.93 $ 197,356 $ 65.70 $ 197,431 $ 65.72
Natural gas sales $ 18,059 $ 1.58 $ 21,739 $ 1.90 $ 48,956 $ 1.66 $
60,919 $ 2.07 Natural gas liquids sales $ 27,106 $ 21.08 $ 35,195 $
27.37 $ 65,377 $ 21.49 $ 83,735 $ 27.53
Operating
expenses
Gathering, transportation and
processing
$ - $ - $ 11,844 $ 2.77 $ - $ - $ 30,396 $ 2.77
Results of Operations
Three Months Ended
September 30,
2018 2017 Production Data: Oil
(MBbls) 1,089 348 Natural gas (MMcf) 11,417 4,709 Natural gas
liquids (MBbls) 1,286 405 Total volumes (MBoe) 4,278 1,538 Average
daily total volumes (MBoe/d) 46.5 16.7
Average Prices -
as reported (1) Oil (per Bbl) $ 68.86 $ 47.99 Natural
gas (per Mcf) $ 1.58 $ 2.73 Natural gas liquids (per Bbl) $ 21.08 $
24.87 Total (per Boe) $ 28.09 $ 25.76
Average Prices -
including impact of derivative contract settlements
(1)(2) Oil (per Bbl) $ 55.71 $ 47.99 Natural gas (per Mcf) $
1.62 $ 2.73 Natural gas liquids (per Bbl) $ 21.08 $ 24.87 Total
(per Boe) $ 24.83 $ 25.76
Average Prices - excluding
gathering, transportation and processing (3) Oil (per
Bbl) $ 68.93 $ 47.99 Natural gas (per Mcf) $ 1.90 $ 2.73 Natural
gas liquids (per Bbl) $ 27.37 $ 24.87 Total (per Boe) $ 30.86 $
25.76 (1) Average prices for the three months ended
September 30, 2018 reflects the adoption of ASC 606 on January 1,
2018. The adoption of ASC 606 requires certain costs that were
previously recorded as gathering, processing and transportation
expenses to be accounted for as a deduction from revenue. We
elected the modified retrospective method of transition.
Accordingly, comparative information has not been adjusted and
continues to be reported under the previous revenue standard. (2)
Excludes settlement of derivative contracts prior to their
contractual maturity. (3) Excludes the effects of netting
gathering, transportation, and processing costs under ASC 606.
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
September 30,
2018 2017 (in thousands, except costs
per Boe)
Operating Expenses Production expenses $ 14,737 $
4,336 Gathering, transportation and processing (1) - 4,890
Production taxes 6,210 847 Exploration expenses 11,646 4,229
Depreciation, depletion, amortization and accretion 37,164 10,824
General and administrative (2) 13,177 4,489 Gain on sale of oil and
natural gas properties - (838 ) Total $ 82,934 $
28,777
Average Costs per Boe Production
expenses $ 3.44 $ 2.82 Gathering, transportation, and processing
(1) - 3.18 Production taxes 1.45 0.55 Exploration expenses 2.72
2.75 Depreciation, depletion, amortization and accretion 8.69 7.04
General and administrative (2) 3.08 2.92 Gain on sale of oil and
natural gas properties - (0.54 ) Total $ 19.38 $
18.72 (1) Gathering, transportation and
processing for the three months ended September 30, 2018 reflects
the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606
requires certain costs that were previously recorded as gathering,
processing and transportation expenses to be accounted for as a
deduction from revenue. We elected the modified retrospective
method of transition. Accordingly, comparative information has not
been adjusted and continues to be reported under the previous
revenue standard. (2) General and administrative expenses for the
three months ended September 30, 2018 include $2.9 million, or
$0.69 per Boe, of equity-based compensation expense.
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 (loss) income and
net (loss) income per share excluding non-cash gains or losses on
derivatives, gains on early terminations of derivative contracts,
gain on the sale of property, certain exploration expenses and the
income tax expense associated with our deferred tax liability as a
result of the Reorganization. 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 (Loss) Income to
Adjusted Net Income and Adjusted Net Income per Share
For the Three Months Ended September 30,
2018 September 30, 2017 (in
thousands) (per diluted share) (in thousands)
(per diluted share) Net (loss) income $ (301,240 ) $ (1.97 )
$ 10,710 $ 0.11 Adjusted for Loss (gain) on derivative
contracts 36,704 0.24 (131 ) (0.00 ) Cash (paid) received upon
settlement of derivative contracts (1) (13,551 ) (0.09 ) - -
Exploration expense 11,171 0.07 4,229 0.04 Gain on sale of oil and
natural gas properties - - (838 ) (0.01 ) Income tax expense
resulting from Reorganization 299,662 1.96 - - Total tax effect of
adjustments (2) (571 ) (0.00 ) -
- Adjusted net income $ 32,175 $ 0.21 $ 13,970
$ 0.14 (1) Excludes cash received upon
settlement of derivative contracts prior to the original
contractual maturity (2)
Computed by applying a combined federal
and state statutory tax rate of 25.5% for the period subsequent to
the Reorganization. No tax effect is presented for periods prior to
Reorganization.
For the Nine Months Ended September
30, 2018 September 30, 2017 (in
thousands) (per diluted share) (in thousands)
(per diluted share) Net (loss) income $ (288,916 ) $ (1.90 )
$ 28,837 $ 0.35 Adjusted for Loss (gain) on derivative
contracts 100,920 0.66 (2,385 ) (0.03 ) Cash (paid) received upon
settlement of derivative contracts (1) (27,839 ) (0.18 ) 130 0.00
Exploration expense 25,642 0.17 4,475 0.05 Gain on sale of oil and
natural gas properties - - (838 ) (0.01 ) Income tax expense
resulting from Reorganization 299,662 1.97 - - Total tax effect of
adjustments (2) (571 ) (0.00 ) -
- Adjusted net income $ 108,898 $ 0.72 $
30,219 $ 0.36 (1) Excludes cash
received upon settlement of derivative contracts prior to the
original contractual maturity (2)
Computed by applying a combined federal
and state statutory tax rate of 25.5% for the period subsequent to
the Reorganization. No tax effect is presented for periods prior to
Reorganization.
Adjusted EBITDAX
Adjusted EBITDAX is a non-GAAP financial measure. We define
Adjusted EBITDAX as net income (loss) adjusted for interest
expense, income tax expense, depreciation, depletion, amortization
and accretion, exploration expense, non-cash equity-based
compensation expense, gain (loss) on early termination of
derivative contracts, and cash (paid) received upon settlement of
derivative contracts. 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, we have not incurred historical
income tax expenses.
We believe 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. We
add 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 credit facility or any of our other contracts.
The following tables present a reconciliation of Adjusted
EBITDAX to net (loss) income, our most directly comparable
financial measures calculated and presented in accordance with GAAP
for each of the periods indicated.
Reconciliation of Net (Loss) Income to
Adjusted EBITDAX
For the Three Months Ended September
30, 2018 2017 (in thousands) Net
(loss) income $ (301,240 ) $ 10,710 Adjusted for Interest
2,092 264 Income tax expense 299,662 - Depreciation, depletion,
amortization and accretion 37,164 10,824 Exploration expense 11,646
4,229 Non-cash equity-based compensation 2,933 - Loss (gain) on
derivative contracts 36,704 (131 ) Cash (paid) received upon
settlement of derivative contracts (1) (13,551 ) -
Adjusted EBITDAX $ 75,410 $ 25,896 (1)
Excludes cash received upon settlement of derivative contracts
prior to the original contractual maturity
For the Nine Months Ended September 30,
2018 2017 (in thousands) Net (loss)
income $ (288,916 ) $ 28,837 Adjusted for Interest 4,978 441
Income tax expense 299,662 - Depreciation, depletion, amortization
and accretion 83,630 22,176 Exploration expense 30,129 4,475
Non-cash equity-based compensation 8,060 - Loss (gain) on
derivative contracts 100,920 (2,385 ) Cash (paid) received upon
settlement of derivative contracts (1) (27,839 ) 130
Adjusted EBITDAX $ 210,624 $ 53,674 (1)
Excludes cash received upon settlement of derivative contracts
prior to the original contractual maturity
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. 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.
The following table provides the YTD calculation of ROE and
ROCE:
For theNine Months
EndedSeptember 30,
ROE and ROCE 2018
(in millions)
Adjusted Net Income $ 108.9 Annualized Adjusted Net Income $
145.2 3Q Equity $ 1,343.8
ROE
10.8 % Adjusted EBITDAX $ 210.6 Less: DD&A
(83.6 ) Adjusted EBIT $ 127.0 Annualized EBIT $ 169.3
Net Debt $ 390.7 3Q Equity $ 1,343.8 Total $ 1,734.6
ROCE 9.8 %
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version on businesswire.com: https://www.businesswire.com/news/home/20181112005795/en/
Roan Resources, Inc.Alyson Gilbert, 405-896-3767Investor
Relations ManagerIR@RoanResources.com
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