Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ:
ROSE, ROSEW, ROSEU) today reported financial and operational
results for the quarter ended June 30, 2019.
Second Quarter 2019 Highlights and Recent
Items:
- Average net production of 18,934
barrels of oil equivalent (“BOE”) per day (“BOEPD”) (70% oil and
85% total liquids), an increase of 3% compared to the second
quarter of 2018
- Reported net income attributable to
Rosehill of $11.2 million, or $0.54 per diluted share, for the
second quarter of 2019, which included a $33.7 million non-cash,
pre-tax gain on commodity derivative instruments
- Delivered Adjusted EBITDAX (a
non-GAAP measure defined and reconciled below) of $43.8 million, a
decrease of 11% over the second quarter of 2018
- Continued Southern Delaware success
including the Silow 14 well, which achieved an average initial rate
over a 7-day period (“IP7”) of 1,069 BOEPD, or 184 BOEPD per 1,000
feet, and 93% oil. The State Neal Lethco 1210 well, the first well
drilled on the Company’s recent acreage expansion, achieved an
average initial rate over a 30-day period (“IP30”) of 1,018 BOEPD,
or 102 BOEPD per 1,000 feet, and 92% oil
- Placed 10 wells onto production in
the second quarter of 2019 with the production impact from these
wells mostly occurring near the end of the period. Average net
production for July 2019 is estimated to be over 20,000 BOEPD on a
two-stream basis
- Reduced cash operating cost (lease
operating expense (“LOE”), gathering and transportation, production
taxes and general and administrative expenses excluding costs
associated with stock-based compensation) per BOE by $1.62, or 12%
compared to the second quarter of 2018
- Continued to generate strong
corporate returns, achieving a 23% cash return on capital invested
(“CROCI”, a non-GAAP measure defined and calculated below) for the
second quarter of 2019
Management Comments
David French, Rosehill’s President and Chief
Executive Officer, commented, “It was a very active quarter in both
of our operating areas as we balanced accelerating our pace of
commercialization in the Southern Delaware, and steady development
within the heart of the Northern Delaware Our production levels
responded as predicted towards the end of quarter as wells shut-in
for simultaneous operations were placed back on production. We
remain confident in the production guidance for 2019 given the
strength of our drilled uncompleted (“DUC”) inventory, and the
solid production levels from the second quarter activity.”
“We are pleased to announce additional well
results for our Southern Delaware area, including IP30 rates for
our first well within the recently announced acreage expansion.
This is also Rosehill’s first two-mile lateral. Even though our
development plan was front-end loaded to the first half of the
year, we are planning additional drilling in the Southern Delaware
in 2019. The Northern Delaware saw six wells drilled and completed
with ongoing completion operations on our nine well DUC inventory
in this area. We anticipate noteworthy contribution from these
wells to our production profile in the second half of 2019, and
look forward to providing future updates. We are excited about the
choices in our portfolio and continue to stay focused on delivering
quality, predictable results.”
Operational Results
For the second quarter of 2019, the Company’s
net production averaged 18,934 BOEPD, a 12% decrease compared to
the average for the first quarter of 2019, comprised of 13,341
barrels of oil per day, 2,912 barrels of natural gas liquids
(“NGLs”) per day and 16.1 million cubic feet of gas (“MMCF”) per
day. Production in the quarter was negatively impacted by wells
shut-in due to simultaneous operations. In total, ten wells were
shut-in for certain periods during the quarter with an estimated
total production impact of over 1,200 BOEPD for the quarter.
Rosehill drilled eight horizontal wells, completed nine wells and
had 12 DUCs at the end of the second quarter of 2019.
Southern Delaware - In the Southern Delaware,
the Company completed three wells in the quarter, bringing the
total completed well count for the first six months of 2019 to nine
wells. During the second quarter, the Company placed the State Neal
Lethco 1210 on to production, the first well completed as part of
the recently announced acreage expansion. The results for certain
recently connected wells, along with additional results for wells
previously reported, are presented in the table below.
|
|
BOEPD per |
|
|
Well |
Formation |
Period |
BOEPD |
1,000’ LL |
Oil % |
|
State Blanco 58 G003, H001, G001 |
Wolfcamp A&B |
IP30 (average) |
631 |
155 |
91 |
% |
|
Trees Estate 77 A001, H001, H003 |
Wolfcamp A&B |
IP30 (average) |
651 |
142 |
91 |
% |
|
State Neal Lethco 1210 |
Wolfcamp B |
IP30 |
1,018 |
102 |
92 |
% |
|
Silow 14 |
Wolfcamp B |
IP7 |
1,069 |
184 |
93 |
% |
Northern Delaware - In the Northern Delaware, the Company
completed six wells in the second quarter. The results for certain
recently connected wells, along with additional results for wells
previously reported, are presented in the table below.
|
|
BOEPD per |
|
|
Well |
Formation |
Period |
BOEPD |
1,000’ LL |
Oil % |
|
Z&T 32 E001, F002, G003 |
Lower Wolfcamp A |
IP180 (average) |
1,189 |
259 |
65 |
% |
|
Z&T 20 E006 |
2nd Bone Spring - Sand |
IP30 |
1,144 |
260 |
72 |
% |
For the second half of 2019, the Company is
considering drilling several wells to further delineate the
Wolfcamp B section in its Northern Delaware area. Based on the
thickness of the interval and the positive results of previously
drilled wells, the Company believes there is significant economic
inventory potential within the Wolfcamp B interval.
Financial Results
For the second quarter of 2019, the Company
reported net income attributable to Rosehill of $11.2 million, or
$0.54 per diluted 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 second quarter of 2019 included a $33.7 million non-cash,
pre-tax gain on commodity derivative instruments compared to a
$20.0 million non-cash, pre-tax loss on commodity derivative
instruments in the second quarter of 2018.
Adjusted EBITDAX totaled $43.8 million for the
second quarter of 2019, as compared to $49.2 million in the second
quarter of 2018. This decrease of 11% was driven primarily by lower
commodity prices, which more than offset the impact of lower per
unit operating expenses and higher production.
For the second quarter of 2019, average realized
prices (all prices excluding the effects of derivatives) were
$55.06 per barrel of oil, $(0.44) per Mcf of natural gas and $12.05
per barrel of NGLs, resulting in a total equivalent price of $40.27
per BOE, a decrease of 16% from the second quarter of 2018.
The Company’s cash operating costs for the
second quarter of 2019 were $11.72 per BOE, which includes LOE,
gathering and transportation costs, production taxes and general
and administrative expenses, and excludes costs associated with
stock-based compensation. Second quarter cash operating costs per
BOE decreased 12% as compared to the second quarter of 2018,
primarily attributable to lower LOE. Second quarter LOE was
positively impacted by lower salt water disposal (“SWD”) costs in
the Southern Delaware area. The Company brought online a company
owned and operated SWD well in the Southern Delaware area which
allowed for less reliance on more costly third-party SWD disposal
services.
Capital Expenditures and Liquidity
During the second quarter of 2019, Rosehill
incurred capital costs, excluding asset retirement costs, of $71.9
million. The portion of capital costs related to facilities during
the second quarter of 2019 was $11.2 million. For the first six
months of 2019, Rosehill incurred capital costs, excluding asset
retirement costs, of $144.5 million. The portion of capital costs
related to facilities and other during the first six months of 2019
was $24.5 million and $1.2 million, respectively.
As previously announced, the Company expects lower drilling and
completions activity in the second half of 2019 compared to the
first half of 2019, which is expected to result in lower capital
costs. The Company continues to expect its results for full year
2019 to be in line with previously provided estimates.
As of June 30, 2019, Rosehill had $4.7 million in cash on hand
and $334.9 million in long-term debt. As of June 30, 2019, cash on
hand and availability under our revolving credit facility was
approximately $65 million.
Commodity Hedging
Included below is a summary of the Company’s derivative
contracts as of June 30, 2019.
| |
|
2019 |
|
2020 |
|
2021 |
|
2022 |
| Commodity
derivative swaps |
|
Oil: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls)
(1)(2) |
1,332,000 |
|
|
1,960,000 |
|
|
— |
|
|
— |
|
|
|
Weighted average fixed price ($/Bbl) |
$ |
53.59 |
|
|
$ |
60.09 |
|
|
$ |
— |
|
|
$ |
— |
|
| Natural
gas: |
|
|
|
|
|
|
|
| |
Notional volume (MMBtu) |
1,682,646 |
|
|
1,970,368 |
|
|
1,615,792 |
|
|
1,276,142 |
|
| |
Weighted average fixed price
($/MMbtu) |
$ |
2.87 |
|
|
$ |
2.75 |
|
|
$ |
2.79 |
|
|
$ |
2.85 |
|
|
Ethane: |
|
|
|
|
|
|
|
| |
Notional volume (Gallons) |
7,027,524 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/Gallons) |
$ |
0.28 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Propane: |
|
|
|
|
|
|
|
| |
Notional volume (Gallons) |
4,685,058 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/Gallons) |
$ |
0.79 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Pentanes: |
|
|
|
|
|
|
|
| |
Notional volume (Gallons) |
1,561,896 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/Gallons) |
$ |
1.47 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Commodity
derivative two-way collars |
|
Oil: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls) |
210,000 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average ceiling price
($/Bbl) |
$ |
60.03 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
Weighted average floor price
($/Bbl) |
$ |
53.14 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Commodity
derivative three-way collars |
|
Oil: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls) |
1,095,258 |
|
|
3,294,000 |
|
|
4,200,000 |
|
|
2,000,000 |
|
| |
Weighted average ceiling price
($/Bbl) |
$ |
65.86 |
|
|
$ |
70.29 |
|
|
$ |
60.40 |
|
|
$ |
61.45 |
|
| |
Weighted average floor price
($/Bbl) |
$ |
60.61 |
|
|
$ |
57.50 |
|
|
$ |
54.49 |
|
|
$ |
55.00 |
|
| |
Weighted average sold put option
price ($/Bbl) |
$ |
45.57 |
|
|
$ |
47.50 |
|
|
$ |
45.51 |
|
|
$ |
45.00 |
|
| |
|
|
|
|
|
|
|
|
| Crude oil
basis swaps |
| Midland /
Cushing: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls) |
2,637,258 |
|
|
5,254,000 |
|
|
3,160,000 |
|
|
2,100,000 |
|
| |
Weighted average fixed price
($/Bbl) |
$ |
(4.65 |
) |
|
$ |
(0.83 |
) |
|
$ |
0.48 |
|
|
$ |
0.54 |
|
| |
|
|
|
|
|
|
|
|
| Natural
gas basis swaps |
| EP
Permian: |
|
|
|
|
|
|
|
| |
Notional volume (MMBtu) |
1,711,062 |
|
|
2,096,160 |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/MMBtu) |
$ |
(1.13 |
) |
|
$ |
(1.03 |
) |
|
$ |
— |
|
|
$ |
— |
|
- During the second quarter of 2019, the Company entered into
commodity derivative swaps where it bought 2,160,000 barrels of
crude oil at a weighted average fixed price of $50.48 per barrel to
offset commodity derivative swaps it previously sold of 2,160,000
barrels of crude oil at a weighted average fixed price of $61.21
per barrel, effectively locking in a gain of approximately $23.2
million that the Company expects to recognize in 2021 when the
swaps settle.
- During the second quarter of 2019, the Company entered into
commodity derivative swaps where it bought 1,100,000 barrels of
crude oil at a weighted average fixed price of $50.55 per barrel to
offset commodity derivative swaps it previously sold of 1,100,000
barrels of crude oil at a weighted average fixed price of $58.42
per barrel, effectively locking in a gain of approximately $8.7
million that the Company expects to recognize in 2022 when the
swaps settle.
Conference Call, Webcast and Presentation
The Company will hold a conference call to
discuss its second quarter 2019 financial and operating results on
Friday, August 9, 2019, 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 9388804. 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 independent oil
and gas exploration company with assets positioned in the Delaware
Basin portion of the Permian Basin. The Company’s strategy includes
the focused development of its multi-bench assets in the Northern
Delaware Basin and the Southern Delaware Basin, as well as adding
economic drilling inventory to support future growth.
|
|
|
Rosehill Resources Inc. Operational Highlights
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2019 |
|
|
2018 |
|
2019 |
|
|
2018 |
|
Revenues: (in thousands) |
|
|
|
|
|
Oil sales |
$ |
66,840 |
|
$ |
73,061 |
$ |
132,693 |
|
$ |
124,615 |
|
Natural gas sales |
|
(649 |
) |
|
2,308 |
|
825 |
|
|
4,053 |
|
NGL sales |
|
3,192 |
|
|
5,158 |
|
7,725 |
|
|
7,645 |
|
Total revenues |
$ |
69,383 |
|
$ |
80,527 |
$ |
141,243 |
|
$ |
136,313 |
|
Average sales price (1): |
|
|
|
|
|
Oil (per Bbl) |
$ |
55.06 |
|
$ |
60.18 |
$ |
51.85 |
|
$ |
60.40 |
|
Natural gas (per Mcf) |
|
(0.44 |
) |
|
1.68 |
|
0.26 |
|
|
1.91 |
|
NGLs (per Bbl) |
|
12.05 |
|
|
22.04 |
|
13.75 |
|
|
21.06 |
|
Total (per Boe) |
$ |
40.27 |
|
$ |
48.02 |
$ |
38.64 |
|
$ |
49.02 |
|
Total, including effects of gain (loss) on settled commodity
derivatives, net (per Boe) |
$ |
37.17 |
|
$ |
42.56 |
$ |
36.90 |
|
$ |
44.63 |
|
Net Production: |
|
|
|
|
|
Oil (MBbls) |
|
1,214 |
|
|
1,214 |
|
2,559 |
|
|
2,063 |
|
Natural gas (MMcf) |
|
1,462 |
|
|
1,375 |
|
3,201 |
|
|
2,127 |
|
NGLs (MBbls) |
|
265 |
|
|
234 |
|
562 |
|
|
363 |
|
Total (MBoe) |
|
1,723 |
|
|
1,677 |
|
3,655 |
|
|
2,781 |
|
Average daily net production volume: |
|
|
|
|
|
Oil (Bbls/d) |
|
13,341 |
|
|
13,341 |
|
14,138 |
|
|
11,398 |
|
Natural gas (Mcf/d) |
|
16,066 |
|
|
15,110 |
|
17,685 |
|
|
11,751 |
|
NGLs (Bbls/d) |
|
2,912 |
|
|
2,571 |
|
3,105 |
|
|
2,006 |
|
Total (Boe/d) |
|
18,934 |
|
|
18,429 |
|
20,193 |
|
|
15,365 |
|
Average costs (per BOE): |
|
|
|
|
|
Lease operating expenses |
$ |
4.90 |
|
$ |
6.69 |
$ |
5.15 |
|
$ |
7.23 |
|
Production taxes |
|
1.74 |
|
|
2.29 |
|
1.78 |
|
|
2.33 |
|
Gathering and transportation |
|
0.77 |
|
|
0.72 |
|
1.01 |
|
|
0.69 |
|
Depreciation, depletion, amortization and accretion |
|
18.96 |
|
|
21.77 |
|
18.78 |
|
|
20.61 |
|
Exploration costs |
|
0.65 |
|
|
1.12 |
|
0.65 |
|
|
0.83 |
|
General and administrative, excluding stock-based compensation |
|
4.31 |
|
|
3.64 |
|
4.23 |
|
|
4.22 |
|
Stock-based compensation |
|
1.11 |
|
|
1.09 |
|
0.80 |
|
|
1.18 |
|
(Gain) loss on disposition of property and equipment |
|
(6.46 |
) |
|
0.10 |
|
(3.04 |
) |
|
0.11 |
|
Total (per Boe) |
$ |
25.98 |
|
$ |
37.42 |
$ |
29.36 |
|
$ |
37.20 |
(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 Ended June
30, |
Six Months Ended June 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
Revenues: |
|
|
|
|
|
Oil sales |
$ |
66,840 |
|
$ |
73,061 |
|
$ |
132,693 |
|
$ |
124,615 |
|
|
Natural gas sales |
|
(649 |
) |
|
2,308 |
|
|
825 |
|
|
4,053 |
|
|
Natural gas liquids sales |
|
3,192 |
|
|
5,158 |
|
|
7,725 |
|
|
7,645 |
|
|
Total revenues |
|
69,383 |
|
|
80,527 |
|
|
141,243 |
|
|
136,313 |
|
|
Operating expenses: |
|
|
|
|
|
Lease operating expenses |
|
8,435 |
|
|
11,225 |
|
|
18,805 |
|
|
20,110 |
|
|
Production taxes |
|
2,992 |
|
|
3,841 |
|
|
6,495 |
|
|
6,481 |
|
|
Gathering and transportation |
|
1,320 |
|
|
1,207 |
|
|
3,681 |
|
|
1,919 |
|
|
Depreciation, depletion, amortization and accretion |
|
32,661 |
|
|
36,506 |
|
|
68,625 |
|
|
57,315 |
|
|
Exploration costs |
|
1,113 |
|
|
1,875 |
|
|
2,368 |
|
|
2,311 |
|
|
General and administrative |
|
9,344 |
|
|
7,930 |
|
|
18,399 |
|
|
15,027 |
|
|
(Gain) loss on disposition of property and equipment |
|
(11,123 |
) |
|
163 |
|
|
(11,114 |
) |
|
296 |
|
|
Total operating expenses |
|
44,742 |
|
|
62,747 |
|
|
107,259 |
|
|
103,459 |
|
|
Operating income |
|
24,641 |
|
|
17,780 |
|
|
33,984 |
|
|
32,854 |
|
|
Other income (expense): |
|
|
|
|
|
Interest expense, net |
|
(6,010 |
) |
|
(4,662 |
) |
|
(11,610 |
) |
|
(8,529 |
) |
|
Gain (loss) on commodity derivative instruments, net |
|
28,377 |
|
|
(19,954 |
) |
|
(76,194 |
) |
|
(41,239 |
) |
|
Other income, net |
|
31 |
|
|
290 |
|
|
93 |
|
|
422 |
|
|
Total other income (expense), net |
|
22,398 |
|
|
(24,326 |
) |
|
(87,711 |
) |
|
(49,346 |
) |
|
Income (loss) before income taxes |
|
47,039 |
|
|
(6,546 |
) |
|
(53,727 |
) |
|
(16,492 |
) |
|
Income tax expense (benefit) |
|
1,517 |
|
|
(15,210 |
) |
|
4,823 |
|
|
(17,400 |
) |
|
Net income (loss) |
|
45,522 |
|
|
8,664 |
|
|
(58,550 |
) |
|
908 |
|
|
Net income (loss) attributable to noncontrolling interest |
|
26,444 |
|
|
(8,347 |
) |
|
(47,465 |
) |
|
(22,423 |
) |
|
Net income (loss) attributable to Rosehill Resources Inc. before
preferred stock dividends |
|
19,078 |
|
|
17,011 |
|
|
(11,085 |
) |
|
23,331 |
|
|
Series A Preferred Stock dividends and deemed dividends |
|
2,027 |
|
|
1,968 |
|
|
4,033 |
|
|
3,897 |
|
|
Series B Preferred Stock dividends, deemed dividends, and
return |
|
5,863 |
|
|
5,844 |
|
|
11,671 |
|
|
11,576 |
|
|
Net income (loss) attributable to Rosehill Resources Inc.
common stockholders |
$ |
11,188 |
|
$ |
9,199 |
|
$ |
(26,789 |
) |
$ |
7,858 |
|
|
Earnings (loss) per common share: |
|
|
|
|
|
Basic |
$ |
0.78 |
|
$ |
1.43 |
|
$ |
(1.90 |
) |
$ |
1.24 |
|
|
Diluted |
$ |
0.54 |
|
$ |
(0.32 |
) |
$ |
(1.90 |
) |
$ |
(0.70 |
) |
|
Weighted average common shares outstanding: |
|
|
|
|
|
Basic |
|
14,382 |
|
|
6,430 |
|
|
14,108 |
|
|
6,327 |
|
|
Diluted |
|
24,562 |
|
|
36,238 |
|
|
14,108 |
|
|
36,135 |
|
|
|
|
ROSEHILL RESOURCES INC. CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)(In thousands, except
share and per share amounts) |
|
|
|
|
June 30, 2019 |
December 31, 2018 |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
4,684 |
$ |
20,157 |
|
Accounts receivable |
|
|
26,810 |
|
32,260 |
|
Accounts receivable, related parties |
|
|
— |
|
78 |
|
Derivative assets |
|
|
3,352 |
|
30,819 |
|
Prepaid and other current assets |
|
|
1,936 |
|
1,371 |
|
Total current assets |
|
|
36,782 |
|
84,685 |
|
Property and equipment: |
|
Oil and natural gas properties (successful efforts), net |
|
731,636 |
|
666,797 |
|
Other property and equipment, net |
|
2,251 |
|
2,592 |
|
Total property and equipment, net |
|
733,887 |
|
669,389 |
|
Other assets, net |
|
5,591 |
|
4,678 |
|
Derivative assets |
|
29,464 |
|
58,314 |
|
Total assets |
$ |
805,724 |
$ |
817,066 |
|
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’
EQUITY |
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
20,961 |
$ |
21,013 |
|
Accounts payable, related parties |
|
63 |
|
287 |
|
Derivative liabilities |
|
11,755 |
|
— |
|
Accrued liabilities and other |
|
27,570 |
|
27,335 |
|
Accrued capital expenditures |
|
22,813 |
|
30,529 |
|
Total current liabilities |
|
83,162 |
|
79,164 |
|
Long-term liabilities: |
|
|
|
Long-term debt, net |
|
334,889 |
|
288,298 |
|
Asset retirement obligations |
|
13,709 |
|
13,524 |
|
Deferred tax liabilities |
|
14,101 |
|
9,278 |
|
Derivative liabilities |
|
1,627 |
|
696 |
|
Other liabilities |
|
3,652 |
|
3,658 |
|
Total long-term liabilities |
|
367,978 |
|
315,454 |
|
Total liabilities |
|
451,140 |
|
394,618 |
|
Commitments and contingencies |
|
|
|
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, 156,746
shares issued and outstanding as of June 30, 2019 and December 31,
2018 |
|
159,008 |
|
155,111 |
|
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, 101,669 shares issued and outstanding as of June 30,
2019 and December 31, 2018 |
|
84,631 |
|
84,631 |
|
Class A Common Stock; $0.0001 par value, 250,000,000 shares
authorized and 14,450,980 and 13,760,136 shares issued and
outstanding as of June 30, 2019 and December 31, 2018 |
|
1 |
|
1 |
|
Class B Common Stock; $0.0001 par value, 30,000,000 shares
authorized, 29,807,692 shares issued and outstanding as of June 30,
2019 and December 31, 2018 |
|
3 |
|
3 |
|
Additional paid-in capital |
|
35,957 |
|
42,271 |
|
Retained earnings |
|
7,686 |
|
26,661 |
|
Total common stockholders’ equity |
|
43,647 |
|
68,936 |
|
Noncontrolling interest |
|
67,298 |
|
113,770 |
|
Total stockholders’ equity |
|
195,576 |
|
267,337 |
|
Total liabilities, mezzanine and stockholders’
equity |
$ |
805,724 |
$ |
817,066 |
|
|
|
ROSEHILL RESOURCES INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(In Thousands) |
|
|
Six Months Ended June 30, |
|
|
2019 |
|
|
2018 |
|
|
Cash flows from operating activities: |
|
Net income (loss) |
$ |
(58,550 |
) |
$ |
908 |
|
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
Depreciation, depletion, amortization, accretion and impairment of
oil and gas properties |
|
68,625 |
|
|
57,315 |
|
|
Deferred income taxes |
|
4,823 |
|
|
(17,400 |
) |
|
Stock-based compensation |
|
2,924 |
|
|
3,288 |
|
|
(Gain) loss on disposition of property and equipment |
|
(11,114 |
) |
|
296 |
|
|
Loss on derivative instruments |
|
76,170 |
|
|
41,082 |
|
|
Net cash paid in settlement of derivative instruments |
|
(7,167 |
) |
|
(12,194 |
) |
|
Amortization of debt issuance costs |
|
906 |
|
|
1,319 |
|
|
Settlement of asset retirement obligations |
|
(8 |
) |
|
(283 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
(Increase) decrease in accounts receivable and accounts receivable,
related parties |
|
5,533 |
|
|
(11,976 |
) |
|
Increase in prepaid and other assets |
|
(565 |
) |
|
(369 |
) |
|
Increase (decrease) in accounts payable and accrued liabilities and
other |
|
(4,600 |
) |
|
12,056 |
|
|
Increase (decrease) in accounts payable, related parties |
|
(224 |
) |
|
553 |
|
|
Net cash provided by operating activities |
|
76,753 |
|
|
74,595 |
|
|
Cash flows from investing activities: |
|
|
|
Additions to oil and natural gas properties |
|
(148,861 |
) |
|
(204,275 |
) |
|
Acquisition of White Wolf |
|
— |
|
|
(4,005 |
) |
|
Acquisition of land and leasehold, royalty and mineral
interest |
|
(1,133 |
) |
|
(14,725 |
) |
|
Proceeds received - Tatanka Asset sale |
|
22,000 |
|
|
— |
|
|
Additions to other property and equipment |
|
(88 |
) |
|
(1,634 |
) |
|
Net cash used in investing activities |
|
(128,082 |
) |
|
(224,639 |
) |
|
Cash flows from financing activities: |
|
Proceeds from revolving credit facility |
|
66,000 |
|
|
213,000 |
|
|
Repayment on revolving credit facility |
|
(20,000 |
) |
|
(68,000 |
) |
|
Debt issuance costs |
|
(658 |
) |
|
(2,380 |
) |
|
Dividends paid on preferred stock |
|
(9,232 |
) |
|
(4,129 |
) |
|
Restricted stock used for tax withholdings |
|
(247 |
) |
|
(261 |
) |
|
Payment on capital lease obligation |
|
(7 |
) |
|
(13 |
) |
|
Net cash provided by financing activities |
|
35,856 |
|
|
138,217 |
|
|
Net decrease in cash, cash equivalents, and restricted cash |
|
(15,473 |
) |
|
(11,827 |
) |
|
Cash and cash equivalents beginning of period |
|
20,157 |
|
|
24,682 |
|
|
Cash and cash equivalents end of period |
$ |
4,684 |
|
$ |
12,855 |
|
|
ROSEHILL RESOURCES INC.CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)(Unaudited)(In thousands) |
|
Supplemental cash flow information and noncash
activity: |
|
|
Six Months Ended June 30, |
|
Supplemental disclosures: |
|
2019 |
|
|
2018 |
|
Cash paid for interest |
$ |
8,954 |
|
$ |
3,748 |
|
|
|
|
|
Supplemental noncash activity: |
|
|
|
Asset retirement obligations incurred |
$ |
(7) |
|
$ |
2,793 |
|
Changes in accrued capital expenditures |
(7,716) |
(16,971) |
|
Changes in accounts payable for capital expenditures |
1,211 |
3,161 |
|
Series A Preferred Stock dividends paid-in-kind |
— |
1,949 |
|
Series A Preferred Stock cash dividends declared and payable |
2,027 |
984 |
|
Series B Preferred Stock dividends paid-in-kind |
— |
3,004 |
|
Series B Preferred Stock cash dividends declared and payable |
3,908 |
2,275 |
|
Series B Preferred Stock return |
3,156 |
3,438 |
|
Series B Preferred Stock deemed dividend |
741 |
631 |
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, amortization, and
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, 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 income (loss), the most directly comparable
U.S. GAAP financial measure.
| |
Three Months Ended |
|
Twelve Months Ended |
| |
June 30, |
|
March 31, |
|
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
| |
(In thousands) |
|
Net income (loss) |
$ |
45,522 |
|
|
$ |
(104,072 |
) |
|
$ |
8,664 |
|
|
$ |
58,504 |
|
|
$ |
(14,040 |
) |
| Interest expense, net |
6,010 |
|
|
5,600 |
|
|
4,662 |
|
|
22,570 |
|
|
10,087 |
|
| Income tax expense
(benefit) |
1,517 |
|
|
3,306 |
|
|
(15,210 |
) |
|
40,385 |
|
|
(15,983 |
) |
| Depreciation, depletion,
amortization and accretion |
32,661 |
|
|
35,964 |
|
|
36,506 |
|
|
153,125 |
|
|
75,639 |
|
| Impairment of oil and natural
gas properties |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,061 |
|
| Unrealized (gain) loss on
commodity derivatives, net |
(33,723 |
) |
|
103,548 |
|
|
10,803 |
|
|
(67,306 |
) |
|
49,110 |
|
| Transaction costs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
149 |
|
| Stock settled stock-based
compensation |
1,765 |
|
|
974 |
|
|
1,760 |
|
|
5,994 |
|
|
4,467 |
|
| Exploration costs |
1,113 |
|
|
1,255 |
|
|
1,875 |
|
|
4,431 |
|
|
3,284 |
|
| (Gain) loss on disposition of
property and equipment |
(11,123 |
) |
|
9 |
|
|
163 |
|
|
(10,911 |
) |
|
(4,688 |
) |
| Other non-cash (income)
expense, net |
58 |
|
|
(81 |
) |
|
(57 |
) |
|
3,801 |
|
|
49 |
|
| Adjusted EBITDAX |
$ |
43,800 |
|
|
$ |
46,503 |
|
|
$ |
49,166 |
|
|
$ |
210,593 |
|
|
$ |
109,135 |
|
Cash return on capital invested (“CROCI”) is a
non-GAAP financial measure calculated by dividing the trailing
twelve month Adjusted EBITDAX (a non-GAAP financial measure
reconciled above) by average gross property and equipment.
Management believes CROCI is useful as a measure of the
profitability of capital employed and long-term company and
management performance.
We have provided the calculation for our CROCI below.
| |
June 30, |
|
June 30, |
|
June 30, |
| |
2019 |
|
2018 |
|
2017 |
| |
(In thousands) |
| Twelve months ending Adjusted
EBITDAX |
$ |
210,593 |
|
|
$ |
109,135 |
|
|
|
| |
|
|
|
|
|
|
Proved oil and natural gas properties |
$ |
910,705 |
|
|
$ |
620,793 |
|
|
$ |
312,368 |
|
| Unproved oil and natural gas
properties |
119,225 |
|
|
131,934 |
|
|
533 |
|
| Land |
1,575 |
|
|
971 |
|
|
406 |
|
| Other property and
equipment |
6,094 |
|
|
5,559 |
|
|
3,566 |
|
| Total property and equipment,
gross |
$ |
1,037,599 |
|
|
$ |
759,257 |
|
|
$ |
316,873 |
|
| |
|
|
|
|
|
| Average property and
equipment, gross (1) |
$ |
898,428 |
|
|
$ |
538,065 |
|
|
|
| |
|
|
|
|
|
| CROCI |
23 |
% |
|
20 |
% |
|
|
(1) For the period ended June 30, 2019, the
average property and equipment, gross was calculated using the
total property and equipment, gross for the period ended June 30,
2019 and June 30, 2018. For the period ended June 30, 2018, the
average property and equipment, gross was calculated using the
total property and equipment, gross for the period ended June 30,
2018 and June 30, 2017.
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, including inventory
potential within the Wolfcamp B interval, strategy, future
operations, expected drilling and completions activity, financial
position, estimated results of operations, future earnings, future
capital spending plans, expected gains from settling derivatives,
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 realize the anticipated benefits of its drilling and
completion activities, 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 the section
titled “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:
| David L. French |
|
Craig Owen |
| President and Chief Executive Officer |
|
Senior Vice President and Chief Financial Officer |
| 281-675-3400 |
|
281-675-3400 |
| |
|
|
| John Crain |
|
|
| Director of Investor Relations |
|
|
| 281-675-3493 |
|
|
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