Quarterly / Earnings Reports | Fourth Quarter (4Q) Update | Financial Results | Capital Markets | Drilling Activity | Suspend or Reduced Operations

Rosehill Resources Details Fourth Quarter 2019 Results

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   |    Tuesday,April 14,2020

Rosehill Resources Inc. reported its Q4 2019 results.

Fourth Quarter 2019 and Current Highlights:

• Average net production of 22,157 barrels of oil equivalent per day ("BOEPD") (72% oil and 86% total liquids)
  
  
• Reported a net loss attributable to Rosehill of $17.5 million, or $1.15 per diluted share, for the fourth quarter of 2019, which includes a $22.7 million non-cash, pre-tax loss on commodity derivative instruments
  
  
• Delivered Adjusted EBITDAX (a non-GAAP measure defined and reconciled below) of $57.2 million
  
  
• Reduced combined lease operating and general and administrative expenses ("LOE" and "G&A," respectively), excluding stock-based compensation, per barrel of oil equivalent ("BOE") by $2.07, or 21%, compared to third quarter of 2019
  
  
• Reduced capital expenditures to $37 million in the fourth quarter of 2019 compared to $57 million in the third quarter of 2019
  
  
• In early February, placed a three-well pad online on the Kyle 26 lease that achieved a combined IP30 of 1,067 BOEPD per well, or 241 BOEPD per 1,000 feet, and 79% oil
  
  
• In March, placed a five-well pad online on the Z&T 32 lease in Northern Delaware targeting the 2nd Bone Spring Sand interval
  
  
• Commodity derivative portfolio projected settlement value of approximately $153 million and mark-to-market value of approximately $137 million, both as of April 9, 2020
  
  
• In March, halted all drilling and completion activity in light of recent deteriorating global markets and commodity prices
  
  
• The Company is exploring strategic alternatives in support of its objectives to maximize value, position the Company for long-term growth and deleverage its balance sheet, including among other things, a financial restructuring or other deleveraging transaction

Full Year 2019 Highlights

• Average net production to 20,786 BOEPD (71% oil and 86% total liquids), an increase of 13% compared to 2018
  
  
• Reported a net loss attributable to Rosehill of $23.3 million, or $1.61 per diluted share, which included a $50.7 million non-cash, pre-tax loss on commodity derivative instruments
  
  
• Delivered Adjusted EBITDAX (a non-GAAP measure defined and reconciled below) of $196.7 million
  
  
• Decreased capital expenditures to $238 million, a reduction of $135 million, compared to 2018

David French, Rosehill's President and Chief Executive Officer, commented, "We continue to be responsive to developments in the current difficult commodity price environment as demonstrated by our recent decision to halt all drilling and completion activities and recent significant staff reduction. This staffing reduction represents approximately $11 million of direct cash general and administrative costs on an annual basis relative to 2019 levels. Although 2019 cash operating cost levels were held to just over $10 per BOE and operating margins were nearly $30 per BOE, we have elected to withdraw 2020 guidance that we issued in December 2019 until recent market conditions stabilize. Our focus will be pursing all avenues to manage field costs and dispatching the most economic barrels throughout 2020."

Operational Results

For the fourth quarter of 2019, the Company's net production averaged 22,157 BOEPD, comprised of 15,843 barrels of oil per day, 3,187 barrels of natural gas liquids ("NGLs") per day and 18.8 million cubic feet of gas ("MMCF") per day. Rosehill drilled seven horizontal wells and completed three wells, ending the quarter with five drilled uncompleted wells.

For the full year 2019, the Company's net production averaged 20,786 BOEPD, comprised of 14,825 barrels of oil per day, 3,060 barrels of NGLs per day and 17.4 MMCF per day. Rosehill drilled 27 horizontal wells and completed 30 wells. On March 19, 2020, the Company announced that it halted future drilling and completion activity for 2020 and had drilled eight wells and completed eight wells to date in 2020.

Northern Delaware - In the Northern Delaware area, the Company drilled six wells and completed two wells in the fourth quarter, bringing the total completed well count for the full year 2019 to 17 wells. The results for certain recently connected wells, along with additional results for wells previously reported, are presented in the table below.

Southern Delaware - In the Southern Delaware, the Company drilled and completed one well in the fourth quarter, bringing the total completed well count for the full year 2019 to 13 wells. The results for certain wells are presented in the table below.

Financial Results

For the fourth quarter of 2019, the Company reported a net loss attributable to Rosehill of $17.5 million, or $1.15 per diluted share, as compared to net income of $50.2 million, or $2.35 per diluted share, in the fourth quarter of 2018. The fourth quarter of 2019 included a $22.7 million non-cash, pre-tax loss on commodity derivative instruments compared to a $199.4 million non-cash, pre-tax gain on commodity derivative instruments in the fourth quarter of 2018.

For the full year 2019, the Company reported a net loss attributable to Rosehill of $23.3 million, or $1.61 per diluted share, as compared to net income of $26.7 million, or $1.76 per diluted share, in the same period in 2018. The full year 2019 included a $50.7 million non-cash, pre-tax loss on commodity derivative instruments and an $11.1 million pre-tax gain on sale of assets. The full year 2018 included a $108.1 million non-cash, pre-tax gain on commodity derivative instruments.

Adjusted EBITDAX totaled $57.2 million for the fourth quarter of 2019, as compared to $63.6 million in the fourth quarter of 2018. This decrease of 10% was driven primarily by lower production and lower commodity pricing for natural gas and natural gas liquids. Adjusted EBITDAX for full year 2019 was $196.7 million, down from $204.4 million for the same period in 2018. This decrease of 4% was driven primarily by lower commodity pricing for oil, natural gas, and natural gas liquids.

For the fourth quarter of 2019, average realized prices (all prices excluding the effects of derivatives) were $55.07 per barrel of oil, $0.74 per Mcf of natural gas and $11.04 per barrel of NGLs, resulting in a total equivalent price of $41.59 per BOE, up 5% from the fourth quarter of 2018.

Rosehill's cash operating costs for the fourth quarter of 2019 were $10.67 per BOE, which includes LOE, gathering and transportation, production taxes and G&A and excludes costs associated with stock-based compensation. Fourth quarter cash operating costs per BOE increased 5% as compared to fourth quarter of 2018, primarily attributable to increased G&A. Cash operating costs for the full year 2019 were $11.86 per BOE, a decrease of 4% for the same period in 2018, driven primarily by lower LOE.

Capital Expenditures and Liquidity

During the full year 2019 and the fourth quarter of 2019, Rosehill incurred capital costs, excluding asset retirement costs, of $238.0 million and $36.7 million, respectively. The portion of capital costs related to facilities during the full year 2019 and the fourth quarter of 2019 was $30.1 million and $0.2 million, respectively.

As of December 31, 2019, Rosehill had $3.0 million in cash on hand and $355.5 million in long-term debt, net of discounts. Liquidity comprised of cash on hand and availability under its revolving credit facility was approximately $83.0 million at December 31, 2019. As previously announced, on March 19, 2020 Rosehill fully drew the amount available under its revolving credit facility as a precautionary measure in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets and commodity prices. After this draw, Rosehill's total debt under its credit facility increased to $340 million with total cash on hand of $73 million as of March 19, 2020.