Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ:
ROSE, ROSEW, ROSEU) today reported financial and operational
results for the quarter ended September 30, 2019.
Third Quarter 2019 Highlights and Recent
Items:
- Average net production of 20,576 barrels of oil equivalent
(“BOE”) per day (“BOEPD”) (74% oil and 88% total liquids), with
September average net production of approximately 23,000 BOEPD
- Reported net income attributable to Rosehill of $20.9 million,
or $0.88 per diluted share, for the third quarter of 2019, which
included a $41.9 million non-cash, pre-tax gain on commodity
derivative instruments
- Delivered Adjusted EBITDAX (a non-GAAP measure defined and
reconciled below) of $49.1 million
- Enhanced liquidity through an increase in the borrowing base
under the Company’s credit facility to $340 million, up from $300
million
- Improved capital efficiency through a 16% decrease in drilling
and completion cost per lateral foot for wells drilled thus far in
2019 compared to wells drilled in 2018
- Planned additional drilling of four to six Northern Delaware
wells late in 2019 supported by continued improvement in well
costs, liquidity, and hedge position. Additionally, we expect to
place two Northern Delaware Wolfcamp B wells and one Southern
Delaware Wolfcamp A well onto production in fourth quarter of
2019
- Commodity hedge portfolio value increased to $62.0 million, net
as of the end of the quarter
- Updated 2019 guidance based on anticipated activity and
financial results
Management Comments
David French, Rosehill’s President and Chief
Executive Officer, commented, “We continue to focus on operational
improvements highlighted in the third quarter by a strong exit
production rate and the resumption of drilling operations after a
short pause catching up on our completions backlog. Activity in the
Northern Delaware featured solid IP30’s of nearly 1,500 BOEPD and
75% oil. In the Southern Delaware, we continue to sharpen our
technical edge where our well design is getting a further
refinement with optimized landing targets based on newly processed
3D seismic, new offset drilling and completion data, and a thorough
outside-in frac modeling peer review. We recognize industry
approaches to the area vary, and we believe value will be driven by
dedicated and disciplined technical work. We look forward to
highlighting results based on the geologic and reservoir
characterization work underway.”
“From a 2019 steering standpoint, we recognize
the commodity environment has been weaker for gas and NGLs and we
have reflected that in our updated EBITDAX guidance. However, we
are buoyed by operational results, second half well cost savings,
and a depth of portfolio that supports bringing a couple of pads of
2020 wells forward in late 2019. We elected to adjust our 2019
drilling program to keep one rig active through the end of the
year, and this puts us in a position to have up to six DUCs around
the New Year. We believe continuing limited drilling allows for
operational continuity and expands cash flow strength as we cross
into 2020. Rosehill looks forward to highlighting the overall 2020
operational picture next month as we roll out our plan.”
Operational Results
For the third quarter of 2019, the Company’s net
production averaged 20,576 BOEPD, a 9% increase compared to the
average for the second quarter of 2019, comprised of 15,152 barrels
of oil per day, 2,848 barrels of natural gas liquids (“NGLs”) per
day and 15.5 million cubic feet of gas (“MMCF”) per day. Rosehill
drilled one horizontal well, completed 12 wells and had one drilled
uncompleted well at the end of the third quarter of 2019.
Northern Delaware - In the Northern Delaware, the Company
completed nine wells in the quarter, bringing the total completed
well count for the first nine months of 2019 to 15 wells. 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 % |
|
Kyle 26 B007, A001, B001 |
Lower Wolfcamp A |
IP30 (average) |
1,470 |
306 |
75 |
% |
|
Z&T 32 A005, B006, C006 |
2nd Bone Spring - Sand |
IP30 (average) |
961 |
222 |
75 |
% |
|
Z&T 20 E006 |
2nd Bone Spring - Sand |
IP180 |
985 |
224 |
70 |
% |
For the fourth quarter of 2019, the Company
plans to drill four to six additional wells in Northern Delaware
and complete these wells early in 2020. The Company currently
plans to target the 2nd Bone Spring Sand formation for these wells
based on recent positive production results in this formation and
lower expected well costs.
Southern Delaware - In the Southern Delaware,
the Company completed three wells in the quarter, bringing the
total completed well count for the first nine months of 2019 to
twelve wells. 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 % |
|
Four Wells Section 14/16 (Hilow, Milow, Silow, Grace) |
Wolfcamp A |
IP30 (average) |
678 |
116 |
87 |
% |
|
Silow 14 |
Wolfcamp A |
IP30 |
924 |
159 |
86 |
% |
|
State Neal Lethco 1210 |
Wolfcamp A |
IP90 |
702 |
70 |
91 |
% |
Financial Results
For the third quarter of 2019, the Company
reported net income attributable to Rosehill of $20.9 million, or
$0.88 per diluted share, as compared to a net loss of $31.4
million, or $4.76 per diluted share, in the third quarter of 2018.
The third quarter of 2019 included a $41.9 million non-cash,
pre-tax gain on commodity derivative instruments compared to a
$62.3 million non-cash, pre-tax loss on commodity derivative
instruments in the third quarter of 2018.
Adjusted EBITDAX totaled $49.1 million for the
third quarter of 2019, as compared to $56.7 million in the third
quarter of 2018. This decrease of 13% was driven primarily by lower
commodity prices and increased lease operating expenses (“LOE”),
which more than offset the impact of higher production.
For the third quarter of 2019, average realized
prices (all prices excluding the effects of derivatives) were
$52.90 per barrel of oil, $0.27 per Mcf of natural gas and $8.10
per barrel of NGLs, resulting in a total equivalent price of $40.28
per BOE, a decrease of 11% from the third quarter of 2018.
The Company’s cash operating costs for the third
quarter of 2019 were $12.56 per BOE, which includes LOE, gathering
and transportation costs, production taxes and general and
administrative expenses, and excludes costs associated with
stock-based compensation. Third quarter cash operating costs per
BOE increased 10% as compared to the third quarter of 2018,
primarily attributable to increased LOE. Third quarter LOE was
negatively impacted by workover activities as well as generator
costs related to delays in establishing adequate commercial
power.
Guidance Update, Capital Expenditures
and Liquidity
Based on recent developments, most notably
around natural gas & NGL pricing and anticipated activity
levels, the Company is providing revised 2019 guidance summarized
in the table below.
|
|
2019Original |
RevisedGuidance |
|
Production (BOEPD) |
20,000 - 21,500 |
20,000- 21,500 |
| Total
Capital ($MM) |
$220 - $240 |
$235 - $245 |
| Adjusted
EBITDAX ($MM) |
$210 - $230 |
$190 - $210 |
|
Debt/TTM Adjusted EBITDAX |
1.4x - 1.6x |
1.7x - 1.9x |
During the third quarter of 2019, Rosehill
incurred capital costs, excluding asset retirement costs, of $57.5
million. The portion of capital costs related to facilities during
the third quarter of 2019 was $5.5 million. For the first nine
months of 2019, Rosehill incurred capital costs, excluding asset
retirement costs, of $201.3 million. The portion of capital costs
related to facilities and other during the first nine months of
2019 was $30.0 million and $1.9 million, respectively.
On September 30, 2019 the Company’s lenders
approved an increase to the borrowing base under the Company's
revolving credit facility from $300 million to $340 million. The
borrowing base was evaluated using reserve data as of July 1, 2019.
As of September 30, 2019, Rosehill had $4.1 million in cash on hand
and $365.2 million in long-term debt. Cash on hand and availability
under our revolving credit facility was approximately $74 million
at September 30, 2019.
Commodity Hedging
Included below is a summary of the Company’s
derivative contracts as of September 30, 2019.
| |
|
2019 |
|
2020 |
|
2021 |
|
2022 |
| Commodity
derivative swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls)
(1)(2) |
666,000 |
|
|
1,000,000 |
|
|
— |
|
|
— |
|
|
|
Weighted average fixed price ($/Bbl) |
$ |
53.59 |
|
|
$ |
67.69 |
|
|
$ |
— |
|
|
$ |
— |
|
| Natural
gas: |
|
|
|
|
|
|
|
| |
Notional volume (MMBtu) |
662,389 |
|
|
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) |
3,552,696 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/Gallons) |
$ |
0.28 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Propane: |
|
|
|
|
|
|
|
| |
Notional volume (Gallons) |
2,368,422 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/Gallons) |
$ |
0.79 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Pentanes: |
|
|
|
|
|
|
|
| |
Notional volume (Gallons) |
789,516 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/Gallons) |
$ |
1.47 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Commodity
derivative two-way collars |
|
Oil: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls) |
105,000 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average ceiling price
($/Bbl) |
$ |
60.03 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
Weighted average floor price
($/Bbl) |
$ |
53.14 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Commodity
derivative three-way collars |
|
Oil: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls) |
595,364 |
|
|
3,294,000 |
|
|
4,200,000 |
|
|
2,000,000 |
|
| |
Weighted average ceiling price
($/Bbl) |
$ |
66.19 |
|
|
$ |
70.29 |
|
|
$ |
60.40 |
|
|
$ |
61.45 |
|
| |
Weighted average floor price
($/Bbl) |
$ |
60.56 |
|
|
$ |
57.50 |
|
|
$ |
54.49 |
|
|
$ |
55.00 |
|
| |
Weighted average sold put option
price ($/Bbl) |
$ |
45.52 |
|
|
$ |
47.50 |
|
|
$ |
45.51 |
|
|
$ |
45.00 |
|
| |
|
|
|
|
|
|
|
|
| Crude oil
basis swaps |
| Midland /
Cushing: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls) |
1,366,364 |
|
|
5,254,000 |
|
|
4,200,000 |
|
|
2,100,000 |
|
| |
Weighted average fixed price
($/Bbl) |
$ |
(4.76 |
) |
|
$ |
(0.83 |
) |
|
$ |
0.49 |
|
|
$ |
0.54 |
|
| |
|
|
|
|
|
|
|
|
| Argus WTI
roll: |
|
|
|
|
|
|
|
| |
Notional volume (Bbls) |
700,000 |
|
|
— |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/Bbl) |
$ |
0.56 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Natural
gas basis swaps |
| EP
Permian: |
|
|
|
|
|
|
|
| |
Notional volume (MMBtu) |
690,805 |
|
|
2,096,160 |
|
|
— |
|
|
— |
|
| |
Weighted average fixed price
($/MMBtu) |
$ |
(1.10 |
) |
|
$ |
(1.03 |
) |
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
| Interest
Rate Swaps: |
|
|
|
|
|
|
|
| |
Notional principal |
$ |
150,000 |
|
|
$ |
150,000 |
|
|
$ |
150,000 |
|
|
$ |
— |
|
| |
Average fixed rate |
1.721 |
% |
|
1.721 |
% |
|
1.721 |
% |
|
— |
|
(1) 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.
(2) 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 third quarter 2019 financial and operating results on
Friday, November 8, 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 6572468. 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 |
|
Nine Months |
| |
|
Ended September 30, |
|
Ended September 30, |
| |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Oil sales |
|
$ |
73,747 |
|
|
$ |
72,799 |
|
|
$ |
206,440 |
|
|
$ |
197,414 |
|
|
Natural gas sales |
|
390 |
|
|
2,633 |
|
|
1,215 |
|
|
6,686 |
|
|
Natural gas liquids sales |
|
2,122 |
|
|
7,125 |
|
|
9,847 |
|
|
14,770 |
|
|
Total revenues |
|
$ |
76,259 |
|
|
$ |
82,557 |
|
|
$ |
217,502 |
|
|
$ |
218,870 |
|
| Average sales price
(1): |
|
|
|
|
|
|
|
|
| Oil (per Bbl) |
|
$ |
52.90 |
|
|
$ |
55.07 |
|
|
$ |
52.22 |
|
|
$ |
58.32 |
|
| Natural gas (per Mcf) |
|
0.27 |
|
|
1.82 |
|
|
0.26 |
|
|
1.87 |
|
| NGLs (per Bbl) |
|
8.10 |
|
|
28.16 |
|
|
11.95 |
|
|
23.98 |
|
| Total (per Boe) |
|
$ |
40.28 |
|
|
$ |
45.44 |
|
|
$ |
39.20 |
|
|
$ |
47.61 |
|
| Total, including effects of
gain (loss) on settled |
|
|
|
|
|
|
|
|
| commodity derivatives, net
(per Boe) |
|
$ |
38.97 |
|
|
$ |
42.68 |
|
|
$ |
37.61 |
|
|
$ |
43.87 |
|
| |
|
|
|
|
|
|
|
|
| Net
production: |
|
|
|
|
|
|
|
|
| Oil (MBbls) |
|
1,394 |
|
|
1,322 |
|
|
3,953 |
|
|
3,385 |
|
| Natural gas (MMcf) |
|
1,424 |
|
|
1,450 |
|
|
4,625 |
|
|
3,577 |
|
| NGLs (MBbls) |
|
262 |
|
|
253 |
|
|
824 |
|
|
616 |
|
| Total (MBoe) |
|
1,893 |
|
|
1,817 |
|
|
5,548 |
|
|
4,597 |
|
| Average daily net
production volume: |
|
|
|
|
|
|
|
|
| Oil (Bbls/d) |
|
15,152 |
|
|
14,370 |
|
|
14,480 |
|
|
12,399 |
|
| Natural gas (Mcf/d) |
|
15,478 |
|
|
15,761 |
|
|
16,941 |
|
|
13,103 |
|
| NGLs (Bbls/d) |
|
2,848 |
|
|
2,750 |
|
|
3,018 |
|
|
2,256 |
|
| Total (Boe/d) |
|
20,576 |
|
|
19,750 |
|
|
20,322 |
|
|
16,839 |
|
|
Average costs (per BOE): |
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
$ |
6.45 |
|
|
$ |
5.07 |
|
|
$ |
5.59 |
|
|
$ |
6.38 |
|
|
Production taxes |
|
1.86 |
|
|
2.22 |
|
|
1.80 |
|
|
2.29 |
|
|
Gathering and transportation |
|
0.47 |
|
|
0.73 |
|
|
0.82 |
|
|
0.71 |
|
|
Depreciation, depletion, amortization and accretion |
|
18.24 |
|
|
26.12 |
|
|
18.59 |
|
|
22.79 |
|
|
Exploration costs |
|
0.42 |
|
|
0.74 |
|
|
0.57 |
|
|
0.80 |
|
|
General and administrative, excluding stock-based compensation |
|
3.78 |
|
|
3.45 |
|
|
4.08 |
|
|
3.92 |
|
|
Stock-based compensation |
|
0.90 |
|
|
1.14 |
|
|
0.83 |
|
|
1.17 |
|
|
(Gain) loss on disposition of property and equipment |
|
— |
|
|
0.02 |
|
|
(2.00 |
) |
|
0.07 |
|
|
Total (per Boe) |
|
$ |
32.12 |
|
|
$ |
39.49 |
|
|
$ |
30.28 |
|
|
$ |
38.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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, |
| |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
Oil sales |
|
$ |
73,747 |
|
|
$ |
72,799 |
|
|
$ |
206,440 |
|
|
$ |
197,414 |
|
|
Natural gas sales |
|
390 |
|
|
2,633 |
|
|
1,215 |
|
|
6,686 |
|
|
Natural gas liquids sales |
|
2,122 |
|
|
7,125 |
|
|
9,847 |
|
|
14,770 |
|
|
Total revenues |
|
76,259 |
|
|
82,557 |
|
|
217,502 |
|
|
218,870 |
|
| Operating
expenses: |
|
|
|
|
|
|
|
|
|
Lease operating expenses |
|
12,207 |
|
|
9,205 |
|
|
31,012 |
|
|
29,315 |
|
|
Production taxes |
|
3,516 |
|
|
4,034 |
|
|
10,011 |
|
|
10,515 |
|
|
Gathering and transportation |
|
881 |
|
|
1,327 |
|
|
4,562 |
|
|
3,246 |
|
|
Depreciation, depletion, amortization and accretion |
|
34,533 |
|
|
47,469 |
|
|
103,158 |
|
|
104,784 |
|
|
Exploration costs |
|
788 |
|
|
1,348 |
|
|
3,156 |
|
|
3,659 |
|
|
General and administrative |
|
8,867 |
|
|
8,342 |
|
|
27,266 |
|
|
23,369 |
|
|
(Gain) loss on disposition of property and equipment |
|
8 |
|
|
29 |
|
|
(11,106 |
) |
|
325 |
|
|
Total operating expenses |
|
60,800 |
|
|
71,754 |
|
|
168,059 |
|
|
175,213 |
|
| Operating
income |
|
15,459 |
|
|
10,803 |
|
|
49,443 |
|
|
43,657 |
|
| Other income
(expense): |
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
(7,950 |
) |
|
(5,363 |
) |
|
(19,560 |
) |
|
(13,892 |
) |
|
Gain (loss) on commodity derivative instruments, net |
|
39,368 |
|
|
(67,314 |
) |
|
(36,826 |
) |
|
(108,553 |
) |
|
Other income (expense), net |
|
(764 |
) |
|
(93 |
) |
|
(671 |
) |
|
329 |
|
|
Total other income (expense), net |
|
30,654 |
|
|
(72,770 |
) |
|
(57,057 |
) |
|
(122,116 |
) |
| Income (loss) before
income taxes |
|
46,113 |
|
|
(61,967 |
) |
|
(7,614 |
) |
|
(78,459 |
) |
|
Income tax expense (benefit) |
|
(8,995 |
) |
|
22,923 |
|
|
(4,172 |
) |
|
5,523 |
|
| Net income
(loss) |
|
55,108 |
|
|
(84,890 |
) |
|
(3,442 |
) |
|
(83,982 |
) |
| Net income (loss) attributable
to noncontrolling interest |
|
26,185 |
|
|
(61,450 |
) |
|
(21,280 |
) |
|
(83,873 |
) |
| Net income (loss) attributable
to Rosehill Resources Inc. before preferred stock dividends |
|
28,923 |
|
|
(23,440 |
) |
|
17,838 |
|
|
(109 |
) |
| Series A Preferred Stock
dividends and deemed dividends |
|
2,048 |
|
|
2,011 |
|
|
6,081 |
|
|
5,907 |
|
| Series B Preferred Stock
dividends, deemed dividends, and return |
|
5,955 |
|
|
5,917 |
|
|
17,626 |
|
|
17,494 |
|
| Net income (loss)
attributable to Rosehill Resources Inc. common
stockholders |
|
$ |
20,920 |
|
|
$ |
(31,368 |
) |
|
$ |
(5,869 |
) |
|
$ |
(23,510 |
) |
| Earnings (loss) per
common share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.45 |
|
|
$ |
(4.76 |
) |
|
$ |
(0.41 |
) |
|
$ |
(3.66 |
) |
|
Diluted |
|
$ |
0.88 |
|
|
$ |
(4.76 |
) |
|
$ |
(0.67 |
) |
|
$ |
(3.66 |
) |
| Weighted average
common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
14,451 |
|
|
6,592 |
|
|
14,223 |
|
|
6,416 |
|
|
Diluted |
|
53,100 |
|
|
6,592 |
|
|
44,031 |
|
|
6,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROSEHILL RESOURCES
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)(In thousands, except
share and per share amounts)
| |
|
September 30, 2019 |
|
December 31, 2018 |
|
ASSETS |
|
|
|
|
| Current
assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,132 |
|
|
$ |
20,157 |
|
|
Accounts receivable |
|
37,351 |
|
|
32,260 |
|
|
Accounts receivable, related parties |
|
— |
|
|
78 |
|
|
Derivative assets |
|
15,931 |
|
|
30,819 |
|
|
Prepaid and other current assets |
|
2,051 |
|
|
1,371 |
|
|
Total current assets |
|
59,465 |
|
|
84,685 |
|
| Property and
equipment: |
|
|
|
|
|
Oil and natural gas properties (successful efforts), net |
|
754,285 |
|
|
666,797 |
|
|
Other property and equipment, net |
|
2,621 |
|
|
2,592 |
|
|
Total property and equipment, net |
|
756,906 |
|
|
669,389 |
|
|
Other assets, net |
|
3,675 |
|
|
4,678 |
|
|
Derivative assets |
|
46,027 |
|
|
58,314 |
|
| Total
assets |
|
$ |
866,073 |
|
|
$ |
817,066 |
|
|
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’
EQUITY |
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
12,826 |
|
|
$ |
21,013 |
|
|
Accounts payable, related parties |
|
1,144 |
|
|
287 |
|
|
Derivative liabilities |
|
117 |
|
|
— |
|
|
Accrued liabilities and other |
|
29,808 |
|
|
27,335 |
|
|
Accrued capital expenditures |
|
24,804 |
|
|
30,529 |
|
|
Total current liabilities |
|
68,699 |
|
|
79,164 |
|
| Long-term
liabilities: |
|
|
|
|
|
Long-term debt, net |
|
365,196 |
|
|
288,298 |
|
|
Asset retirement obligations |
|
14,178 |
|
|
13,524 |
|
|
Deferred tax liabilities |
|
5,107 |
|
|
9,278 |
|
|
Derivative liabilities |
|
1,797 |
|
|
696 |
|
|
Other liabilities |
|
3,645 |
|
|
3,658 |
|
|
Total long-term liabilities |
|
389,923 |
|
|
315,454 |
|
| Total
liabilities |
|
458,622 |
|
|
394,618 |
|
| |
|
|
|
|
| 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 September 30, 2019 and December
31, 2018 |
|
161,012 |
|
|
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, 103,717 and 101,699 shares issued and outstanding as of
September 30, 2019 and December 31, 2018, respectively |
|
86,679 |
|
|
84,631 |
|
|
Class A Common Stock; $0.0001 par value, 250,000,000 shares
authorized and 14,451,367 and 13,760,136 shares issued and
outstanding as of September 30, 2019 and December 31, 2018,
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, 2019 and December 31, 2018 |
|
3 |
|
|
3 |
|
|
Additional paid-in capital |
|
36,538 |
|
|
42,271 |
|
|
Retained earnings |
|
28,606 |
|
|
26,661 |
|
|
Total common stockholders’ equity |
|
65,148 |
|
|
68,936 |
|
|
Noncontrolling interest |
|
94,612 |
|
|
113,770 |
|
| Total stockholders’
equity |
|
246,439 |
|
|
267,337 |
|
| Total liabilities,
mezzanine equity and stockholders’ equity |
|
$ |
866,073 |
|
|
$ |
817,066 |
|
| |
|
|
|
|
|
|
|
|
ROSEHILL RESOURCES
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(In thousands)
| |
|
Nine Months Ended September 30, |
| |
|
2019 |
|
2018 |
| Cash flows from
operating activities: |
|
|
|
|
|
Net loss |
|
$ |
(3,442 |
) |
|
$ |
(83,982 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
Depreciation, depletion, amortization and accretion |
|
103,158 |
|
|
104,784 |
|
|
Deferred income taxes |
|
(4,172 |
) |
|
5,523 |
|
|
Stock-based compensation |
|
4,629 |
|
|
5,364 |
|
|
(Gain) loss on disposition of property and equipment |
|
(11,106 |
) |
|
325 |
|
|
Loss on derivative instruments |
|
37,912 |
|
|
108,500 |
|
|
Net cash paid in settlement of derivative instruments |
|
(9,519 |
) |
|
(17,193 |
) |
|
Amortization of debt issuance costs |
|
1,433 |
|
|
1,723 |
|
|
Settlement of asset retirement obligations |
|
(7 |
) |
|
(551 |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Increase in accounts receivable and accounts receivable, related
parties |
|
(5,005 |
) |
|
(22,412 |
) |
|
(Increase) decrease in prepaid and other assets |
|
587 |
|
|
(176 |
) |
|
Increase in accounts payable and accrued liabilities and other |
|
762 |
|
|
14,828 |
|
|
Increase (decrease) in accounts payable, related parties |
|
857 |
|
|
(211 |
) |
|
Net cash provided by operating activities |
|
116,087 |
|
|
116,522 |
|
| Cash flows from
investing activities: |
|
|
|
|
|
Additions to oil and natural gas properties |
|
(211,796 |
) |
|
(292,955 |
) |
|
Acquisition of White Wolf |
|
— |
|
|
(4,005 |
) |
|
Acquisition of land and leasehold, royalty and mineral
interest |
|
(1,175 |
) |
|
(15,245 |
) |
|
Proceeds received - Tatanka Asset sale |
|
21,770 |
|
|
— |
|
|
Additions to other property and equipment |
|
(683 |
) |
|
(1,834 |
) |
|
Net cash used in investing activities |
|
(191,884 |
) |
|
(314,039 |
) |
| Cash flows from
financing activities: |
|
|
|
|
|
Proceeds from revolving credit facility |
|
108,000 |
|
|
274,000 |
|
|
Repayment on revolving credit facility |
|
(32,000 |
) |
|
(80,000 |
) |
|
Debt issuance costs |
|
(799 |
) |
|
(2,497 |
) |
|
Dividends paid on preferred stock |
|
(15,169 |
) |
|
(7,388 |
) |
|
Restricted stock used for tax withholdings |
|
(246 |
) |
|
(258 |
) |
|
Payment on capital lease obligation |
|
(14 |
) |
|
(21 |
) |
|
Net cash provided by financing activities |
|
59,772 |
|
|
183,836 |
|
|
Net decrease in cash, cash equivalents, and restricted cash |
|
(16,025 |
) |
|
(13,681 |
) |
| Cash and cash
equivalents beginning of period |
|
20,157 |
|
|
24,682 |
|
| Cash and cash
equivalents end of period |
|
$ |
4,132 |
|
|
$ |
11,001 |
|
| |
|
|
|
|
|
|
|
|
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, |
| |
|
2019 |
|
2018 |
| Supplemental
disclosures: |
|
|
|
|
|
Cash paid for interest |
|
$ |
17,600 |
|
|
$ |
10,160 |
|
| |
|
|
|
|
| Supplemental noncash
activity: |
|
|
|
|
| Asset retirement obligations
incurred, net of revision of estimates |
|
$ |
268 |
|
|
$ |
4,367 |
|
| Changes in accrued capital
expenditures |
|
(5,725 |
) |
|
(2,035 |
) |
| Changes in accounts payable
for capital expenditures |
|
(7,243 |
) |
|
(7,662 |
) |
| Series A Preferred Stock
dividends paid-in-kind |
|
2,048 |
|
|
2,955 |
|
| Series A Preferred Stock cash
dividends declared and payable |
|
— |
|
|
1,005 |
|
| Series B Preferred Stock
dividends paid-in-kind |
|
— |
|
|
4,554 |
|
| Series B Preferred Stock cash
dividends declared and payable |
|
3,951 |
|
|
2,323 |
|
| Series B Preferred Stock
return |
|
4,771 |
|
|
5,130 |
|
| Series B Preferred Stock
deemed dividend |
|
1,130 |
|
|
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, 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 |
|
|
|
|
|
| |
September 30, |
|
June 30, |
|
September 30, |
|
|
| |
2019 |
|
2019 |
|
2018 |
|
Revised Guidance |
| |
|
| |
(In thousands) |
|
Net income (loss) |
$ |
55,108 |
|
|
$ |
45,522 |
|
|
$ |
(84,890 |
) |
|
$ |
15,000 |
|
|
- |
$ |
20,000 |
|
| Interest expense, net |
7,950 |
|
|
6,010 |
|
|
5,363 |
|
|
25,000 |
|
|
- |
27,000 |
|
| Income tax expense
(benefit) |
(8,995 |
) |
|
1,517 |
|
|
22,923 |
|
|
(3,000 |
) |
|
- |
(5,000 |
) |
| Depreciation, depletion,
amortization and accretion |
34,533 |
|
|
32,661 |
|
|
47,469 |
|
|
140,000 |
|
|
- |
145,000 |
|
| Unrealized (gain) loss on
commodity derivatives, net |
(41,852 |
) |
|
(33,723 |
) |
|
62,315 |
|
|
15,000 |
|
|
- |
24,000 |
|
| Stock settled stock-based
compensation |
1,710 |
|
|
1,765 |
|
|
2,052 |
|
|
5,000 |
|
|
- |
7,000 |
|
| Exploration costs |
788 |
|
|
1,113 |
|
|
1,348 |
|
|
3,000 |
|
|
- |
4,000 |
|
| (Gain) loss on disposition of
property and equipment |
8 |
|
|
(11,123 |
) |
|
29 |
|
|
(10,000 |
) |
|
- |
(12,000 |
) |
| Other non-cash (income)
expense, net |
(103 |
) |
|
58 |
|
|
105 |
|
|
— |
|
|
|
— |
|
| Adjusted EBITDAX |
$ |
49,147 |
|
|
$ |
43,800 |
|
|
$ |
56,714 |
|
|
$ |
190,000 |
|
|
- |
$ |
210,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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