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Pressburg (ROAN)

Filed: 6 Nov 19, 4:23pm

Exhibit 99.1

 

NEWS RELEASE  LOGO

 

 

Roan Resources, Inc. Reports Third Quarter 2019 Results

OKLAHOMA CITY, November 6, 2019 – 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;

 

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


 

 

 

  

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 

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.

 

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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 Form10-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 Form10-K for the year ended December 31, 2018 and any subsequently filed quarterly reports on Form10-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

 

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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.

 

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Roan Resources, Inc.

Unaudited Condensed Consolidated Statements of Operations

 

   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 
  

 

 

  

 

 

  

 

 

  

 

 

 

 

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Roan Resources, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

   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

   —     —   

Additionalpaid-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 
  

 

 

  

 

 

 

 

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Roan Resources, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

   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 
  

 

 

  

 

 

 

 

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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   $—     $—     $—   

 

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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 

 

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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.

 

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   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 arenon-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 excludingnon-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.

 

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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 anon-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.

 

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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.

 

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Net Debt

Net Debt is anon-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 anon-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.

Investor Contact:

Elijah Lavicky

Vice President of Finance

405-896-8449

IR@RoanResources.com

 

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