Roan Resources, Inc. Reports Third Quarter 2019 Results

OKLAHOMA CITY--()--Roan Resources, Inc. (NYSE: ROAN) (“Roan” or the “Company”) today announced third quarter 2019 operating and financial results.

Merger with Citizen Energy

  • On October 1, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Citizen Energy Operating, LLC, a Delaware limited liability company (“Citizen Operating”), Citizen Energy Pressburg, Inc., a Delaware corporation and wholly owned subsidiary of Citizen Operating (“Merger Sub”) and the Company. The Merger Agreement provides for, among other things, the merger of the Company into Merger Sub with the Company as the surviving entity and a wholly owned subsidiary of Citizen Operating (the “Merger”).
  • Roan expects the Merger to close during the fourth quarter of 2019 or the first quarter of 2020, subject to Roan stockholder approval, regulatory approvals and the satisfaction of other customary closing conditions.
  • Shareholders are invited to attend the special meeting on December 4, 2019, to consider and vote on proposals related to the proposed acquisition of the company. Please refer to the Proxy Statement filed with the SEC on November 4, 2019 for additional details.
  • For further information related to the Merger, interested parties are invited to access the Merger Proxy Statement on the Company’s website at www.RoanResources.com under the “Investors” section of the site.

Third Quarter 2019 Highlights

  • Production of approximately 53.7 thousand barrels of oil equivalent per day (MBoe/d) (26% oil, 27% natural gas liquids (NGLs), 47% gas), which represented an increase of 15% as compared to the third quarter of 2018. The Company elected to be in ethane rejection for the quarter;
     
    3Q 2019 2Q 2019 3Q 2018
    Production Data
    Oil (MBbls)

    1,291

    1,198

    1,089

    Natural gas (MMcf)

    13,820

    12,533

    11,417

    Natural gas liquids (MBbls)

    1,345

    1,339

    1,286

    Total volumes (MBoe)

    4,939

    4,626

    4,278

    Average daily total volumes (MBoe/d)

    53.7

    50.8

    46.5

  • Net income was $19.3 million, or $0.13 per diluted share; Adjusted EBITDAX(1) (non-GAAP) was $86.8 million;
  • Capital expenditures totaled approximately $130.9 million;
  • The Company drilled 14 gross (8.3 net) operated wells (26.0 gross lateral miles) during the third quarter. The Company also brought online 18 gross (14.2 net) operated wells during the third quarter.
3Q 2019 YTD 2019
Operated Well Data
Drilled gross wells

14

50

Drilled net wells

8.3

34.3

Drilled gross lateral miles

26.0

91

First sales gross wells

18

55

First sales net wells

14.2

42.2

1)

Please see the supplemental financial information in the table under “Non-GAAP Financial Measures” at the end of this earnings release for a reconciliation of the non-GAAP financial measure of Adjusted EBITDAX to its most directly comparable GAAP financial measure

Financial Update

Third quarter 2019 net income was $19.3 million, or $0.13 per dilutive share, and adjusted net income (non-GAAP) was $13.9 million, or $0.09 per dilutive share. Third quarter 2019 Adjusted EBITDAX (non-GAAP) was $86.8 million.

See the definitions and reconciliations of adjusted net income, adjusted net income per share, Adjusted EBITDAX, net funded debt 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 provided in the supporting tables or definitions at the conclusion of this press release.

Third quarter 2019 average realized prices were $54.51 per barrel of oil (Bo), $8.05 per barrel of NGLs and $0.81 per Mcf of natural gas, resulting in a total equivalent unhedged price of $18.70 per Boe or a total equivalent hedged price of $22.05 per Boe. Average prices excluding the impact of hedges were approximately 11% lower than the previous quarter primarily due to further weakness in the NGL and natural gas markets.

The Company’s adjusted cash operating costs (non-GAAP) for the third quarter were $4.49 per Boe, including production expense of $2.61 per Boe, production tax of $0.98 per Boe and adjusted cash G&A expense (non-GAAP) of $0.90 per Boe. Cash G&A expense was lower as compared to the second quarter primarily due to a reversal of accrued amounts related to anticipated 2019 performance bonuses.

Capital expenditures for third quarter 2019 totaled approximately $130.9 million, a $16.6 million increase as compared to the second quarter 2019. The increase in capital expenditures is primarily due to increases in working interests as producing well ownership was finalized through the pooling process.

As of the end of the third quarter, Roan had $3.5 million of cash on the balance sheet, $732.6 million drawn on its revolving credit facility and $50.0 million funded on its term loan, resulting in net funded debt (non-GAAP) of $779.2 million. The Company had approximately $50 million of available liquidity through the committed but unfunded balances in the Roan Inc. Term Loan and approximately $17 million of availability on its Credit Facility as of September 30, 2019.

For the fourth quarter, the Company has 13 thousand barrels per day of oil hedged at $60.75 per barrel, 120 thousand MMBtu per day of natural gas hedged at $2.90 per MMBtu, 80 thousand MMBtu per day of natural gas basis hedged at $0.52 per MMBtu and 10 thousand barrels per day of NGLs hedged at $25.65 per barrel. Tables showing the Company’s derivative contracts as of November 4, 2019 are provided at the conclusion of this press release.

Guidance

Roan has also elected to temporarily curtail its drilling and development activity and to suspend all completion activity. This reduction in activity is to allow our new CEO, Rick Gideon, time to assess the Company’s overall operations plan. As a result of this change, investors should no longer rely on the guidance provided by the Company on its last quarterly investor call, and Roan does not expect to otherwise update or provide further guidance.

Third Quarter 2019 Earnings Conference Call

Due to the pending proposed merger, Roan will not host a conference call in conjunction with its third quarter 2019 earnings. Interested parties are invited to access Roan’s Form 10-Q for the third quarter 2019 on the Company’s website at www.RoanResources.com under the “Investors” section of the site.

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 Annual Report on Form 10-K for the year ended December 31, 2018 and any subsequently filed quarterly reports on Form 10-Q.

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, the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance, the structure and timing of any transaction or strategic alternative and whether any transaction or strategic alternative will be completed, 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 prior to September 24, 2018 and on and after September 24, 2018, the results of Roan Resources, Inc.

Roan Resources, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

 

 
Revenues
Oil sales

$

70,371

 

$

74,987

 

$

200,138

 

$

197,356

 

Natural gas sales

 

7,114

 

 

10,442

 

 

24,962

 

 

31,900

 

Natural gas sales - Affiliates

 

4,070

 

 

7,617

 

 

21,092

 

 

17,056

 

Natural gas liquid sales

 

6,901

 

 

12,983

 

 

23,721

 

 

38,127

 

Natural gas liquid sales - Affiliates

 

3,924

 

 

14,123

 

 

18,126

 

 

27,250

 

Gain (loss) on derivative contracts

 

40,675

 

 

(36,704

)

 

(5,913

)

 

(100,920

)

Total revenues

 

133,055

 

 

83,448

 

 

282,126

 

 

210,769

 

Operating Expenses
Production expenses

 

7,439

 

 

14,737

 

 

29,008

 

 

30,111

 

Production expenses

 

5,431

 

 

-

 

 

10,011

 

 

-

 

Production taxes

 

4,839

 

 

6,210

 

 

14,943

 

 

10,892

 

Exploration expenses

 

14,578

 

 

11,646

 

 

38,472

 

 

30,129

 

Depreciation, depletion, amortization and accretion

 

55,504

 

 

37,164

 

 

141,969

 

 

83,630

 

General and administrative

 

8,752

 

 

13,177

 

 

36,888

 

 

40,283

 

Gain on sale of other assets

 

(31

)

 

-

 

 

(645

)

 

-

 

Total operating expenses

 

96,512

 

 

82,934

 

 

270,646

 

 

195,045

 

Total operating income

 

36,543

 

 

514

 

 

11,480

 

 

15,724

 

Other income (expense)
Interest expense, net

 

(9,051

)

 

(2,092

)

 

(24,230

)

 

(4,978

)

Interest expense - Affiliates

 

(2,317

)

 

-

 

 

(2,344

)

 

-

 

Other

 

18

 

 

-

 

 

(10

)

 

-

 

Net income (loss) before income taxes

 

25,193

 

 

(1,578

)

 

(15,104

)

 

10,746

 

Income tax expense (benefit)

 

5,898

 

 

299,662

 

 

(3,589

)

 

299,662

 

Net income (loss)

$

19,295

 

$

(301,240

)

$

(11,515

)

$

(288,916

)

Earnings (loss) per share
Basic

$

0.13

 

$

(1.97

)

$

(0.08

)

$

(1.90

)

Diluted

$

0.13

 

$

(1.97

)

$

(0.08

)

$

(1.90

)

Weighted average number of shares outstanding
Basic

 

154,150

 

 

152,540

 

 

153,104

 

 

152,129

 

Diluted

 

154,150

 

 

152,540

 

 

153,104

 

 

152,129

 

Roan Resources, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
September 30, 2019 December 31, 2018
(in thousands, except par value and share data)
ASSETS
Current assets
Cash and cash equivalents

$

3,464

 

$

6,883

 

Accounts receivable
Oil, natural gas and natural gas liquid sales

 

41,635

 

 

55,564

 

Joint interest owners and other, net

 

146,449

 

 

133,387

 

Affiliates

 

2,684

 

 

9,669

 

Prepaid drilling advances

 

3,898

 

 

28,977

 

Derivative contracts

 

47,840

 

 

82,180

 

Other current assets

 

5,922

 

 

6,655

 

Total current assets

 

251,892

 

 

323,315

 

Noncurrent assets
Oil and natural gas properties, successful efforts method

 

3,040,279

 

 

2,628,333

 

Accumulated depreciation, depletion, amortization and impairment

 

(400,710

)

 

(230,836

)

Oil and natural gas properties, net

 

2,639,569

 

 

2,397,497

 

Derivative contracts

 

18,794

 

 

20,638

 

Other

 

11,780

 

 

7,659

 

Total assets

$

2,922,035

 

$

2,749,109

 

 
LIABILITIES AND EQUITY
Current liabilities
Accounts payable

$

67,821

 

$

49,746

 

Accrued liabilities

 

84,716

 

 

176,494

 

Accounts payable and accrued liabilities - Affiliates

 

7,721

 

 

8,577

 

Revenue payable

 

99,623

 

 

97,963

 

Drilling advances

 

15,885

 

 

31,058

 

Derivative contracts

 

-

 

 

845

 

Other current liabilities

 

2,666

 

 

790

 

Total current liabilities

 

278,432

 

 

365,473

 

Noncurrent liabilities
Long-term debt

 

732,639

 

 

514,639

 

Long-term debt, net - Affiliates

 

45,595

 

 

-

 

Deferred tax liabilities, net

 

353,274

 

 

356,862

 

Asset retirement obligations

 

17,887

 

 

16,058

 

Derivative contracts

 

-

 

 

141

 

Other

 

5,661

 

 

902

 

Total liabilities

 

1,433,488

 

 

1,254,075

 

Commitments and contingencies
Equity
Class A common stock, $0.001 par value; 800,000,000 shares authorized; 154,333,746 shares issued and outstanding at September 30, 2019 and 152,539,532 shares issued and outstanding at December 31, 2018

 

154

 

 

153

 

Preferred stock, $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding at September 30, 2019 or December 31, 2018

 

-

 

 

-

 

Additional paid-in capital

 

1,651,556

 

 

1,646,401

 

Treasury stock

 

(128

)

 

-

 

Accumulated deficit

 

(163,035

)

 

(151,520

)

Total equity

 

1,488,547

 

 

1,495,034

 

Total liabilities and equity

$

2,922,035

 

$

2,749,109

 

Roan Resources, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Nine Months Ended September 30,
 

 

2019

 

 

2018

 

 
Cash flows from operating activities
Net loss

$

(11,515

)

$

(288,916

)

Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion

 

141,969

 

 

83,630

 

Unproved leasehold amortization and impairment

 

35,932

 

 

25,642

 

Gain on sale of other assets

 

(645

)

 

-

 

Amortization of deferred financing costs

 

2,332

 

 

571

 

Loss on derivative contracts

 

5,913

 

 

100,920

 

Net cash received (paid) upon settlement of derivative contracts

 

20,006

 

 

(27,462

)

Equity-based compensation

 

2,838

 

 

8,060

 

Deferred income taxes

 

(3,589

)

 

299,662

 

Other

 

4,110

 

 

551

 

Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable and other assets

 

(31,775

)

 

(154,716

)

Accounts payable and other liabilities

 

4,422

 

 

158,702

 

Net cash provided by operating activities

 

169,998

 

 

206,644

 

 
Cash flows from investing activities
Acquisition of oil and natural gas properties

 

-

 

 

(22,935

)

Capital expenditures for oil and natural gas properties

 

(447,433

)

 

(485,580

)

Acquisition of other property and equipment

 

(83

)

 

(2,353

)

Proceeds from sale of other assets

 

1,475

 

 

-

 

Net cash used in investing activities

 

(446,041

)

 

(510,868

)

 
Cash flows from financing activities
Proceeds from borrowings

 

263,000

 

 

309,300

 

Proceeds from borrowings - Affiliates

 

48,750

 

 

-

 

Repayment of borrowings

 

(45,000

)

 

-

 

Other

 

5,874

 

 

(2,647

)

Net cash provided by financing activities

 

272,624

 

 

306,653

 

Net (decrease) increase in cash and cash equivalents

 

(3,419

)

 

2,429

 

Cash and cash equivalents, beginning of period

 

6,883

 

 

1,471

 

Cash and cash equivalents, end of period

$

3,464

 

$

3,900

 

The following table represents the Company's open commodity contracts at September 30, 2019:

 

2019

 

2020

 

2021

 

Total

Oil fixed prices swaps

 

 

 

 

 

 

 

Volume (Bbl)

1,200,730

 

 

3,429,500

 

 

1,730,000

 

 

6,360,230

 

Weighted-average price

$

60.75

 

 

$

60.57

 

 

$

56.08

 

 

$

59.38

 

Natural gas fixed price swaps

 

 

 

 

 

 

 

Volume (MMBtu)

11,040,000

 

 

19,665,000

 

 

7,250,000

 

 

37,955,000

 

Weighted-average price

$

2.90

 

 

$

2.63

 

 

$

2.65

 

 

$

2.71

 

Natural gas basis swaps

 

 

 

 

 

 

 

Volume (MMBtu)

7,360,000

 

 

10,980,000

 

 

 

 

18,340,000

 

Weighted-average price

$

0.52

 

 

$

0.49

 

 

$

 

 

$

0.50

 

Natural gas liquids fixed prices swaps

 

 

 

 

 

 

 

Volume (Bbl)

460,000

 

 

1,281,000

 

 

730,000

 

 

2,471,000

 

Weighted-average price

$

28.66

 

 

$

23.22

 

 

$

21.90

 

 

$

23.84

 

Per the covenants of the Merger Agreement, the Company was required to enter into additional commodity contracts. The following table presents the additional derivative contracts entered into in October 2019:

 

2019

 

2020

 

2021

 

2022

 

2023

 

2024

Oil fixed price swaps

 

 

 

 

 

 

 

 

 

 

 

Volume (Bbl)

 

 

 

 

 

 

1,261,500

 

 

1,047,000

 

 

686,500

 

Weighted-average price

$

 

 

$

 

 

$

 

 

$

50.00

 

 

$

50.00

 

 

$

50.00

 

Natural gas fixed price swaps

 

 

 

 

 

 

 

 

 

 

 

Volume (MMBtu)

 

 

9,845,000

 

 

15,370,000

 

 

 

 

 

 

 

Weighted-average price

$

 

 

$

2.39

 

 

$

2.39

 

 

$

 

 

$

 

 

$

 

Natural gas basis swaps

 

 

 

 

 

 

 

 

 

 

 

Volume (MMBtu)

 

 

18,580,000

 

 

22,610,000

 

 

 

 

 

 

 

Weighted-average price

$

 

 

$

0.45

 

 

$

0.38

 

 

$

 

 

$

 

 

$

 

Natural gas liquids fixed price swaps

 

 

 

 

 

 

 

 

 

 

 

Volume (Bbl)

456,500

 

 

1,574,400

 

 

1,441,100

 

 

 

 

 

 

 

Weighted-average price

$

22.62

 

 

$

19.09

 

 

$

18.91

 

 

$

 

 

$

 

 

$

 

Results of Operations

The following tables represent the Company's production and average realized prices:

 
Three Months Ended
September 30,

 

2019

 

2018

Production Data
Oil (MBbls)

 

1,291

 

1,089

Natural gas (MMcf)

 

13,820

 

11,417

Natural gas liquids (MBbls)

 

1,345

 

1,286

Total volumes (MBoe)

 

4,939

 

4,278

Average daily total volumes (MBoe/d)

 

53.7

 

46.5

 
Average Prices - as reported
Oil (per Bbl)

$

54.51

$

68.86

Natural gas (per Mcf)

$

0.81

$

1.58

Natural gas liquids (per Bbl)

$

8.05

$

21.08

Total (per Boe)

$

18.70

$

28.09

 
Average Prices - including impact of derivative contract settlements
Oil (per Bbl)

$

58.13

$

55.71

Natural gas (per Mcf)

$

1.36

$

1.62

Natural gas liquids (per Bbl)

$

11.17

$

21.08

Total (per Boe)

$

22.05

$

24.83

 
Average Prices - excluding gathering, transportation and processing
Oil (per Bbl)

$

54.57

$

68.93

Natural gas (per Mcf)

$

1.49

$

1.90

Natural gas liquids (per Bbl)

$

12.49

$

27.37

Total (per Boe)

$

21.84

$

30.86

Nine Months Ended
September 30,

 

2019

 

2018

Production Data
Oil (MBbls)

 

3,628

 

3,004

Natural gas (MMcf)

 

37,973

 

29,486

Natural gas liquids (MBbls)

 

4,013

 

3,042

Total volumes (MBoe)

 

13,970

 

10,960

Average daily total volumes (MBoe/d)

 

51.2

 

40.1

 
Average Prices - as reported
Oil (per Bbl)

$

55.16

$

65.70

Natural gas (per Mcf)

$

1.21

$

1.66

Natural gas liquids (per Bbl)

$

10.43

$

21.49

Total (per Boe)

$

20.62

$

28.44

 
Average Prices - including impact of derivative contract settlements
Oil (per Bbl)

$

58.56

$

55.70

Natural gas (per Mcf)

$

1.40

$

1.73

Natural gas liquids (per Bbl)

$

12.85

$

21.49

Total (per Boe)

$

22.71

$

25.90

 
Average Prices - excluding gathering, transportation and processing
Oil (per Bbl)

$

55.29

$

65.72

Natural gas (per Mcf)

$

1.91

$

2.07

Natural gas liquids (per Bbl)

$

14.78

$

27.53

Total (per Boe)

$

23.80

$

31.21

Operating Expenses

Three Months Ended
September 30,

 

2019

 

 

2018

(in thousands, except costs per Boe)
Operating Expenses
Production expenses

$

12,870

 

$

14,737

Production taxes

 

4,839

 

 

6,210

Exploration expenses

 

14,578

 

 

11,646

Depreciation, depletion, amortization and accretion

 

55,504

 

 

37,164

General and administrative (1)

 

8,752

 

 

13,177

Loss on sale of other assets

 

(31

)

 

-

Total

$

96,512

 

$

82,934

 
Average Costs per Boe
Production expenses

$

2.61

 

$

3.44

Production taxes

 

0.98

 

 

1.45

Exploration expenses

 

2.95

 

 

2.72

Depreciation, depletion, amortization and accretion

 

11.24

 

 

8.69

General and administrative (1)

 

1.77

 

 

3.08

Loss on sale of other assets

 

(0.01

)

 

-

Total

$

19.54

 

$

19.38

 

(1)

General and administrative expenses for the three months ended September 30, 2019 and 2018 include $3.0 million, or $0.61 per Boe, and $2.9 million, or $0.69 per Boe, of equity-based compensation expense, respectively. General and administrative expenses for the three months ended September 30, 2019 includes ($1.2) million, or ($0.25) per Boe, of reversal of bad debt expense due to a change in the allowance for doubtful accounts.
Nine Months Ended
September 30,

 

2019

 

 

2018

(in thousands, except costs per Boe)
Operating Expenses
Production expenses

$

39,019

 

$

30,111

Production taxes

 

14,943

 

 

10,892

Exploration expenses

 

38,472

 

 

30,129

Depreciation, depletion, amortization and accretion

 

141,969

 

 

83,630

General and administrative (1)

 

36,888

 

 

40,283

Gain on sale of other assets

 

(645

)

 

-

Total

$

270,646

 

$

195,045

 
Average Costs per Boe
Production expenses

$

2.79

 

$

2.75

Production taxes

 

1.07

 

 

0.99

Exploration expenses

 

2.75

 

 

2.75

Depreciation, depletion, amortization and accretion

 

10.16

 

 

7.63

General and administrative (1)

 

2.64

 

 

3.68

Gain on sale of other assets

 

(0.05

)

 

-

Total

$

19.36

 

$

17.80

 

(1)

General and administrative expenses for the nine months ended September 30, 2019 and 2018 include $2.8 million, or $0.20 per Boe, and $8.1 million, or $0.74 per Boe, of equity-based compensation expense, respectively. General and administrative expenses for the nine months ended September 30, 2019 includes $4.1 million, or $0.29 per Boe, of bad debt expense and $2.5 million, or $0.18 per Boe, of aborted offering costs.

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 income (loss) and net income (loss) per share excluding non-cash gains or losses on derivatives, gains on early terminations of derivative contracts, exploration expense, strategic alternative and merger related expenses, aborted offering costs, severance and other employee matter expense and gain on the sale of other assets. 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 Income (Loss) to Adjusted Net Income and Adjusted Net Income per Share

For the Three Months Ended September 30,

2019

2018

(in thousands) (per diluted share) (in thousands) (per diluted share)
Net income (loss)

$

19,295

 

$

0.13

 

$

(301,240

)

$

(1.97

)

 
Adjusted for
(Gain) loss on derivative contracts

 

(40,675

)

 

(0.26

)

 

36,704

 

 

0.24

 

Cash received (paid) upon settlement of derivative contracts

 

16,541

 

 

0.11

 

 

(13,551

)

 

(0.09

)

Exploration expense

 

14,578

 

 

0.09

 

 

11,646

 

 

0.08

 

Strategic alternative and merger related expenses

 

1,153

 

 

0.01

 

 

-

 

 

-

 

Aborted offering costs

 

330

 

 

0.00

 

 

-

 

 

-

 

Severance and other employee matters

 

1,049

 

 

0.01

 

 

-

 

 

-

 

Gain on sale of other assets

 

(31

)

 

(0.00

)

 

-

 

 

-

 

Income tax expense resulting from Reorganization

 

-

 

 

-

 

 

299,662

 

 

1.96

 

Total tax effect of adjustments (1)

 

1,651

 

 

0.01

 

 

(571

)

 

(0.00

)

Adjusted net income

$

13,891

 

$

0.09

 

$

32,650

 

$

0.21

 

 

(1)

Computed by applying a combined federal and state effective tax rate of 23.4% and 25.5% for the three months ended September 30, 2019 and the period subsequent to the Reorganization through September 30, 2018, respectively.

For the Nine Months Ended September 30,

2019

2018

(in thousands) (per diluted share) (in thousands) (per diluted share)
Net loss

$

(11,515

)

$

(0.08

)

$

(288,916

)

$

(1.90

)

 
Adjusted for
Loss on derivative contracts

 

5,913

 

 

0.04

 

 

100,920

 

 

0.66

 

Cash received (paid) upon settlement of derivative contracts (1)

 

29,284

 

 

0.19

 

 

(27,839

)

 

(0.18

)

Exploration expense

 

38,472

 

 

0.25

 

 

30,129

 

 

0.20

 

Strategic alternative and merger related expenses

 

1,153

 

 

0.01

 

 

-

 

 

-

 

Aborted offering costs

 

2,485

 

 

0.02

 

 

-

 

 

-

 

Severance and employee matters

 

1,422

 

 

0.01

 

 

-

 

 

-

 

Gain on sale of other assets

 

(645

)

 

(0.00

)

 

-

 

 

-

 

Income tax expense resulting from Reorganization

 

-

 

 

-

 

 

299,662

 

 

1.97

 

Total tax effect of adjustments (2)

 

(18,584

)

 

(0.12

)

 

(571

)

 

(0.00

)

Adjusted net income

$

47,985

 

$

0.31

 

$

113,385

 

$

0.75

 

 

(1)

The nine month period ended September 30, 2018 excludes cash received upon settlement of derivative contracts prior to the original contractual maturity. There were no cash receipts or payments related to settlement of derivative contracts prior to the original contractual maturity during the nine months ended September 30, 2019.

(2)

Computed by applying a combined federal and state effective tax rate of 23.8% and 25.5% for the nine months ended September 30, 2019 and the period subsequent to the Reorganization through September 30, 2018, respectively.

Adjusted EBITDAX

Adjusted EBITDAX is a non-GAAP financial measure. The Company defines Adjusted EBITDAX as net income (loss) adjusted for interest expense, income tax expense (benefit), depreciation, depletion, amortization and accretion, exploration expense, non-cash equity-based compensation expense, strategic alternative and merger related expenses, aborted offering costs, severance and employee matter expenses, expense for allowance for doubtful accounts, (gain) loss on derivative contracts, and cash (paid) received upon settlement of derivative contracts, excluding amounts on contracts settled prior to contract maturity. 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, the Company did not incur historical income tax expenses.

The Company believes 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. The Company adds 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 revolving credit facility or any of our other contracts.

The following tables present a reconciliation of Adjusted EBITDAX to net income (loss), our most directly comparable financial measure calculated and presented in accordance with GAAP for each of the periods indicated.

Reconciliation of Net Income (Loss) to Adjusted EBITDAX

 

 

For the Three Months Ended September 30,

 

 

 

2019

 

 

 

2018

 

 

 

(in thousands)

Net income (loss)

$

 

19,295

 

 

$

 

(301,240

)

 

 

 

 

 

Adjusted for

 

 

 

 

Interest

 

11,368

 

 

 

2,092

 

 

Income tax expense

 

5,898

 

 

 

299,662

 

 

Depreciation, depletion, amortization and accretion

 

55,504

 

 

 

37,164

 

 

Exploration expense

 

14,578

 

 

 

11,646

 

 

Non-cash equity-based compensation

 

2,995

 

 

 

2,933

 

 

Strategic alternative and merger related expenses

 

1,153

 

 

 

-

 

 

Aborted offering costs

 

330

 

 

 

-

 

 

Severance and employee matters

 

1,049

 

 

 

-

 

 

Allowance for doubtful accounts

 

(1,245

)

 

 

-

 

 

Gain on sale of other assets

 

(31

)

 

 

-

 

 

(Gain) loss on derivative contracts

 

(40,675

)

 

 

36,704

 

 

Cash received (paid) upon settlement of derivative contracts

 

16,541

 

 

 

(13,551

)

Adjusted EBITDAX

$

 

86,760

 

 

$

 

75,410

 

For the Nine Months Ended September 30,

 

2019

 

 

2018

 

(in thousands)
Net loss

$

(11,515

)

$

(288,916

)

 
Adjusted for
Interest

 

26,574

 

 

4,978

 

Income tax (benefit) expense

 

(3,589

)

 

299,662

 

Depreciation, depletion, amortization and accretion

 

141,969

 

 

83,630

 

Exploration expense

 

38,472

 

 

30,129

 

Non-cash equity-based compensation

 

2,838

 

 

8,060

 

Strategic alternative and merger related expenses

 

1,153

 

 

-

 

Aborted offering costs

 

2,485

 

 

-

 

Severance and employee matters

 

1,422

 

 

-

 

Allowance for doubtful accounts

 

4,093

 

 

-

 

Gain on sale of other assets

 

(645

)

 

-

 

Loss on derivative contracts

 

5,913

 

 

100,920

 

Cash received (paid) upon settlement of derivative contracts (1)

 

29,284

 

 

(27,839

)

Adjusted EBITDAX

$

238,454

 

$

210,624

 

 

(1)

The nine month period ended September 30, 2018 excludes cash received upon settlement of derivative contracts prior to the original contractual maturity. There were no cash receipts or payments related to settlement of derivative contracts prior to the original contractual maturity during the nine months ended September 30, 2019.

Net Debt

Net Debt is a non-GAAP financial measure equal to long-term debt outstanding on the credit facility and term loan, exclusive of any discounts or fees, less cash on hand.

Net Funded Debt Reconciliation

3Q 2019
Credit Facility

$

732,639

 

Term Loan, net

 

45,595

 

Unamortized original issue discount on Term Loan

 

1,022

 

Deferred financing costs on Term Loan

 

3,480

 

Repayment Premium on Term Loan

 

(97

)

Funded debt

$

782,639

 

 
Less: Cash

$

3,464

 

 
Net Debt

$

779,175

 

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, expense for allowance for doubtful accounts, severance and employee matter expense, strategic alternatives and merger related costs and aborted offering costs. 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.

Contacts

Elijah Lavicky
Vice President of Finance
405-896-8449
IR@RoanResources.com

Contacts

Elijah Lavicky
Vice President of Finance
405-896-8449
IR@RoanResources.com