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Rosehill Resources Inc. Reports Fourth Quarter and Full Year 2018 Results

HOUSTON, March 27, 2019 /Globe Newswire/ -- Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ: ROSE, ROSEW, ROSEU) today reported financial and operational results for the fourth quarter and year ended December 31, 2018.

Fourth Quarter 2018 Highlights and Recent Items:

Grew average net production to 22,779 barrels of oil equivalent per day (“BOEPD”) (73% oil and 87% total liquids), an increase of 15% compared to the third quarter of 2018

Reported net income attributable to Rosehill of $50.2 million, or $2.35 per fully diluted share, for the fourth quarter of 2018, which included a $199.4 million non-cash, pre-tax gain on commodity derivative instruments

Delivered Adjusted EBITDAX (a non-GAAP measure defined and reconciled below) of $63.6 million, an increase of 12% over the third quarter of 2018

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 $1.06, or 12%, compared to third quarter of 2018

Received commitments from lenders to increase the borrowing base under the Company’s credit facility to $300 million as of March 27, 2019, up from $220 million as of December 2018

Entered into agreement for sale of assets in Lea County, New Mexico expect net proceeds of approximately $22 million, subject to customary purchase price adjustments

Full Year 2018 Highlights:

Grew average net production to 18,337 BOEPD (73% oil and 87% total liquids), an increase of 214% compared to 2017

Reported net income attributable to Rosehill of $26.7 million, or $1.76 per diluted share, compared to a net loss $8.5 million, or $1.43 per share, for 2017

Delivered Adjusted EBITDAX (a non-GAAP measure defined and reconciled below) of $204.4 million, an increase of 337% over 2017

Reduced combined LOE and G&A, excluding stock-based compensation, per BOE by $1.42, or 13%, compared to 2017

Management Comments

Gary C. Hanna, Rosehill’s Chairman and Interim President and Chief Executive Officer, commented, “2018 was a year of tremendous accomplishments for Rosehill. We met or exceeded all of the targets we set, highlighted by production and Adjusted EBITDAX surpassing the upper end of our guidance range. While pursuing these achievements, we remained focused on cost, highlighted by lease operating and general and administrative expense per BOE reaching all-time lows for the company. These efforts translated into strong year-end reserves for 2018, underscored by an increase in proved reserves of 55% and an $80 million increase in liquidity from our borrowing base redetermination this month.”

Mr. Hanna continued, “As we begin the year, we remain focused on several key fronts including an aggressive development pace in our Southern Delaware area and executing on our 2019 program that provides year over year production and Adjusted EBITDAX growth at approximately 40% less in capital expenditures. We’re also excited about our recently announced farm-in agreement in Southern Delaware and several projects currently underway to optimize existing production in our Northern Delaware area. We are very encouraged by the early 2019 results from both of our asset areas.”







Operational Results

For the fourth quarter of 2018, the Company’s net production averaged 22,779 BOEPD, a 15% increase compared to the average for the third quarter of 2018, comprised of 16,604 barrels of oil per day, 3,178 barrels of natural gas liquids (“NGLs”) per day and 18.0 million cubic feet of gas (“MMCF”) per day. Rosehill operated two rigs, drilled eight gross horizontal wells and completed three wells in the fourth quarter of 2018 and had eight drilled uncompleted wells at the end of the fourth quarter of 2018.

For the full year 2018, the Company’s net daily production averaged 18,337 net BOEPD, which was comprised of 13,460 barrels of oil per day, 2,488 barrels of NGLs per day and 14.3 MMCF of gas per day, an increase (net BOEPD) of 214% compared to the full year 2017 average. Rosehill drilled 33 gross horizontal wells and completed 30 wells in 2018.

In December, the Company began flowback on a three well pad on the Z&T 32 lease in Loving County, with the wells producing from the Lower Wolfcamp A formation. These wells reached average IP 30 rates of 1,560 BOEPD, 68% oil, or 373 BOEPD per 1,000 feet.

In October, the Company placed on to production its first 2nd Bone Spring Shale delineation well on the Kyle 26 lease located in Loving County. The Kyle 26 E007 well reached an IP 30 of 781 BOEPD, 72% oil, or 182 BOEPD per 1,000 feet.

Financial Results

For the fourth quarter of 2018, the Company reported net income attributable to Rosehill of $50.2 million, or $2.35 per diluted share, as compared to a net loss of $31.4 million, or a $4.76 loss per share, in the third quarter of 2018. The fourth quarter of 2018 included a $199.4 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.

For the year ended December 31, 2018, the Company reported net income attributable to Rosehill of $26.7 million, or $1.76 per diluted share, as compared to a net loss of $8.5 million, or $1.43 per share, in the same period in 2017. The full year 2018 included a $108.1 million non-cash, pre-tax gain on commodity derivative instruments. The full year 2017 included a $16.6 million non-cash, pre-tax loss on commodity derivative instruments and a $5.0 million pre-tax gain on sale of assets

Adjusted EBITDAX totaled $63.6 million for the fourth quarter of 2018, as compared to $56.7 million in the third quarter of 2018 and $18.7 million for the fourth quarter of 2017. This increase of 12% was driven primarily by higher production and lower per unit operating expenses. Adjusted EBITDAX for the year ended December 31, 2018 was $204.4 million, up from $46.8 million for the same period in 2017.

For the fourth quarter of 2018, average realized prices (all prices excluding the effects of derivatives) were $48.51 per barrel of oil, $1.64 per Mcf of natural gas and $21.14 per barrel of NGLs, resulting in a total equivalent price of $39.60 per BOE, down 13% from the third quarter of 2018 and down 7% from the fourth quarter of 2017.

Rosehill’s cash operating costs for the fourth quarter of 2018 were $10.17 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 decreased 11% as compared to third quarter of 2018 and decreased 30% as compared to the fourth quarter of 2017, primarily attributable to reduced LOE and G&A.

During 2018 and the fourth quarter of 2018, Rosehill incurred capital costs, excluding asset retirement costs, of $373.7 million and $73.0 million, respectively. The portion of capital costs related to facilities during 2018 and the fourth quarter of 2018 was $94.1 million and $25.9 million, respectively.
  






Development Update

In the Southern Delaware area, the Company has drilled nine wells since the third quarter of 2018, bringing the total wells drilled in this area to thirteen. The Company has recently finished completion operations on six wells in the Southern Delaware. Activity relating to these wells is provided below.

Well
Formation
Current Status
Expected Future Status
State Blanco 58 G003
Wolfcamp A
Recently began flowback
Production results in April
State Blanco 58 G001
Wolfcamp B
Recently began flowback
Production results in April
State Blanco 58 H001
Wolfcamp B
Recently began flowback
Production results in April
Trees Estate 77 H001
Wolfcamp A
Preparing for flowback
Production results in May
Trees Estate 77 H003
Wolfcamp B
Preparing for flowback
Production results in May
Trees Estate 77 A001
Wolfcamp B
Preparing for flowback
Production results in May


In the Northern Delaware area, the Company has begun testing the use of electric submersible pumps (“ESPs”) to improve production on mature producing wells. In February, an ESP was installed on the Kyle 24 G001 well, which was first placed on production in May of 2016 targeting the Lower Wolfcamp A formation. Shortly after installation of the ESP, the well reached production of 684 BOEPD, 77% oil, and approximately 200% above production levels just prior to installation of the ESP. Based on these encouraging results, the Company plans to install additional ESPs on mature producing wells throughout the year in the Northern Delaware area.

Capital Structure and Liquidity

As of December 31, 2018, Rosehill had $20.2 million in cash on hand and $288.3 million in long-term debt. As of December 31, 2018, total liquidity was approximately $46.2 million which included cash on hand and availability under the revolving credit facility. When including the effects of the Company’s recently redetermined borrowing base, described below, liquidity as of December 31, 2018 was approximately $126 million.

On March 27, 2019, the Company received commitments from lenders to increase the borrowing base under the Company's revolving credit facility from $220 million to $300 million. The borrowing base was evaluated using reserve data as of December 31, 2018. The Company’s redetermined borrowing base primarily consisted of proved reserves associated with its Northern Delaware area due to the limited number of producing wells in the Southern Delaware.

Transportation & Hedging Update

The Company recently began piped transportation of oil in its Southern Delaware area on the infield gathering system and intra-basin transportation pipeline. As a result, the Company is now transporting approximately 99% of its produced oil through pipe.

Included below is a summary of the Company’s derivative contracts as of December 31, 2018. Subsequent to December 31, 2018 and through March 27, 2019, the Company entered into additional derivative contracts, including approximately 5.0 million barrels of crude oil basis swaps that settle from 2020 through 2022 at a weighted average price of $0.38 per barrel, 1.0 MMbtu of natural gas swaps that settle in 2019 at a weighted average price of $2.88 per MMbtu, and 1.0 MMbtu of natural gas basis swaps that settle in 2019 at a weighted average price of ($1.28) per MMbtu.






Commodity Hedging

As of December 31, 2018, the Company had the following outstanding derivative contracts:

 
 
2019
 
2020
 
2021
 
2022
Commodity derivative swaps
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
2,664,000

 
1,960,000

 
2,160,000

 
1,100,000

 
Weighted average fixed price ($/Bbl)
$
53.59

 
$
60.09

 
$
61.21

 
$
58.42

Natural gas:
 
 
 
 
 
 
 
 
Notional volume (MMBtu)
2,220,000

 
1,500,000

 
1,200,000

 
1,200,000

 
Weighted average fixed price ($/MMbtu)
$
2.88

 
$
2.84

 
$
2.85

 
$
2.87

Ethane:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
12,444,138

 

 

 

 
Weighted average fixed price ($/Gallons)
$
0.28

 
$

 
$

 
$

Propane:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
8,296,218

 

 

 

 
Weighted average fixed price ($/Gallons)
$
0.79

 
$

 
$

 
$

Pentanes:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
2,765,700

 

 

 

 
Weighted average fixed price ($/Gallons)
$
1.47

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Commodity derivative two-way collars
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
601,000

 

 

 

 
Weighted average ceiling price ($/Bbl)
$
61.30

 
$

 
$

 
$

 
Weighted average floor price ($/Bbl)
$
55.21

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Commodity derivative three-way collars
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
1,531,832

 
3,294,000

 

 

 
Weighted average ceiling price ($/Bbl)
$
68.52

 
$
70.29

 
$

 
$

 
Weighted average floor price ($/Bbl)
$
57.62

 
$
57.50

 
$

 
$

 
Weighted average sold put option price ($/Bbl)
$
45.51

 
$
47.50

 
$

 
$

 
 
 
 
 
 
 
 
 
Crude oil basis swaps
Midland / Cushing:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
4,800,832

 
3,513,600

 

 

 
Weighted average fixed price ($/Bbl)
$
(4.93
)
 
$
(1.43
)
 
$

 
$

 
 
 
 
 
 
 
 
 
Natural gas basis swaps
EP Permian:
 
 
 
 
 
 
 
 
Notional volume (MMBtu)
1,781,472

 
2,096,160

 

 

 
Weighted average fixed price ($/MMBtu)
$
(1.03
)
 
$
(1.03
)
 
$

 
$







Annual Report on Form 10-K

The Company’s financial statements and related footnotes are available in its Annual Report on Form 10-K for the year ended December 31, 2018, which will be filed with the U.S. Securities and Exchange Commision.

Conference Call, Webcast and Presentation

The Company will hold a conference call to discuss its fourth quarter and full year 2018 financial and operating results on Thursday, March 28, 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 6248448. 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 oil and gas exploration company with producing assets in Texas and New Mexico with its investment activity focused in the Delaware Basin portion of the Permian Basin. The Company’s strategy for growth includes the organic development of its two core acreage areas in the Northern Delaware Basin and the Southern Delaware basin, as well as focused acquisitions in the Delaware Basin.






Rosehill Resources Inc.
Operational Highlights
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2018
 
2017
 
2018
 
2017
Revenues: (in thousands)
 
 
 
 
 
 
 
 
Oil sales
 
$
74,125

 
$
25,132

 
$
271,539

 
$
61,596

Natural gas sales
 
2,706

 
1,579

 
9,392

 
7,171

NGL sales
 
6,174

 
2,064

 
20,944

 
7,469

Total revenues
 
$
83,005

 
$
28,775

 
$
301,875

 
$
76,236

Average sales price (1):
 
 
 
 
 
 
 
 
Oil (per Bbl)
 
$
48.51

 
$
52.69

 
$
55.27

 
$
48.46

Natural gas (per Mcf)
 
1.64

 
2.54

 
1.80

 
2.65

NGLs (per Bbl)
 
21.14

 
21.50

 
23.07

 
18.31

Total (per Boe)
 
$
39.60

 
$
42.57

 
$
45.10

 
$
35.77

Total, including effects of gain (loss) on settled commodity derivatives, net (per Boe)
 
$
40.42

 
$
42.66

 
$
42.79

 
$
35.85

Net Production:
 
 
 
 
 
 
 
 
Oil (MBbls)
 
1,528

 
477

 
4,913

 
1,271

Natural gas (MMcf)
 
1,654

 
621

 
5,231

 
2,709

NGLs (MBbls)
 
292

 
96

 
908

 
408

Total (MBoe)
 
2,096

 
676

 
6,693

 
2,131

Average daily net production volume:
 
 
 
 
 
 
 
 
Oil (Bbls/d)
 
16,604

 
5,188

 
13,460

 
3,483

Natural gas (Mcf/d)
 
17,981

 
6,747

 
14,332

 
7,423

NGLs (Bbls/d)
 
3,178

 
1,039

 
2,488

 
1,118

Total (Boe/d)
 
22,779

 
7,352

 
18,337

 
5,838

Average costs (per BOE):
 
 
 
 
 
 
 
 
Lease operating expense
 
$
4.63

 
$
6.51

 
$
5.83

 
$
5.11

Production taxes
 
1.90

 
2.01

 
2.17

 
1.66

Gathering and transportation
 
0.81

 
0.96

 
0.74

 
1.40

Depreciation, depletion and amortization
 
17.67

 
14.71

 
21.19

 
16.94

Impairment of oil and natural gas properties
 

 
1.57

 

 
0.50

Exploration costs
 
0.34

 
0.80

 
0.65

 
0.82

General and administrative, excluding stock-based compensation
 
2.83

 
5.10

 
3.58

 
5.72

Stock-based compensation
 
0.55

 
1.84

 
0.97

 
0.58

Transaction expenses
 

 

 

 
1.23

(Gain) loss on sale of property and equipment
 
0.08

 
(7.37
)
 
0.07

 
(2.34
)
Total (per Boe)
 
$
28.81

 
$
26.13

 
$
35.20

 
$
31.62


(1) Excluding the effects of realized and unrealized commodity derivative transactions unless noted otherwise





ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 

 
 

 
 
Oil sales
 
$
74,125

 
$
25,132

 
$
271,539

 
$
61,596

Natural gas sales
 
2,706

 
1,579

 
9,392

 
7,171

Natural gas liquids sales
 
6,174

 
2,064

 
20,944

 
7,469

Total revenues
 
83,005

 
28,775

 
301,875

 
76,236

Operating expenses:
 
 
 
 
 
 

 
 

Lease operating expenses
 
9,695

 
4,402

 
39,010

 
10,881

Production taxes
 
3,991

 
1,361

 
14,506

 
3,535

Gathering and transportation
 
1,693

 
647

 
4,939

 
2,976

Depreciation, depletion, amortization and accretion
 
37,031

 
9,941

 
141,815

 
36,091

Impairment of oil and natural gas properties
 

 
1,061

 

 
1,061

Exploration costs
 
715

 
539

 
4,374

 
1,747

General and administrative
 
7,100

 
4,690

 
30,469

 
13,428

Transaction costs
 

 

 

 
2,618

(Gain) loss on disposition of property and equipment
 
174

 
(4,984
)
 
499

 
(4,995
)
Total operating expenses
 
60,399

 
17,657

 
235,612

 
67,342

Operating income
 
22,606

 
11,118

 
66,263

 
8,894

Other income (expense):
 
 
 
 
 
 

 
 

Interest expense, net
 
(5,597
)
 
(1,258
)
 
(19,489
)
 
(2,532
)
Gain (loss) on commodity derivative instruments, net
 
201,157

 
(18,087
)
 
92,604

 
(16,336
)
Other expense, net
 
(3,583
)
 
(179
)
 
(3,254
)
 
(284
)
Total other income (expense), net
 
191,977

 
(19,524
)
 
69,861

 
(19,152
)
Income (loss) before income taxes
 
214,583

 
(8,406
)
 
136,124

 
(10,258
)
Income tax expense
 
12,639

 
2,340

 
18,162

 
1,690

Net income (loss)
 
201,944

 
(10,746
)
 
117,962

 
(11,948
)
Net income (loss) attributable to noncontrolling interest
 
143,799

 
(10,802
)
 
59,926

 
(18,811
)
Net income attributable to Rosehill Resources Inc. before preferred stock dividends
 
58,145

 
56

 
58,036

 
6,863

Series A Preferred Stock dividends and deemed dividends
 
2,031

 
2,922

 
7,938

 
12,936

Series B Preferred Stock dividends, deemed dividends, and return
 
5,943

 
2,447

 
23,437

 
2,447

Net income (loss) attributable to Rosehill Resources Inc. common stockholders
 
$
50,171

 
$
(5,313
)
 
$
26,661

 
$
(8,520
)
Earnings (loss) per common share:
 
 
 
 
 
 

 
 

Basic
 
$
3.72

 
$
(0.87
)
 
$
3.25

 
$
(1.43
)
Diluted
 
$
2.35

 
$
(0.87
)
 
$
1.76

 
$
(1.43
)
Weighted average common shares outstanding:
 
 
 
 
 
 

 
 

Basic
 
13,477

 
6,123

 
8,196

 
5,945

Diluted
 
22,229

 
6,123

 
46,499

 
5,945








ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
 
December 31, 2018
 
December 31, 2017
ASSETS
 
 
 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
20,157

 
$
20,677

Restricted cash
 

 
4,005

Accounts receivable
 
32,260

 
1,527

Accounts receivable, related parties
 
78

 
16,022

Derivative assets
 
30,819

 

Prepaid and other current assets
 
1,371

 
1,312

Total current assets
 
84,685

 
43,543

Property and equipment:
 
 

 
 

Oil and natural gas properties (successful efforts), net
 
666,797

 
431,332

Other property and equipment, net
 
2,592

 
1,283

Total property and equipment, net
 
669,389

 
432,615

Other assets, net
 
4,678

 
824

Derivative assets
 
58,314

 

Total assets
 
$
817,066

 
$
476,982

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
 
 
 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
21,013

 
$
31,868

Accounts payable, related parties
 
287

 
223

Derivative liabilities
 

 
10,772

Accrued liabilities and other
 
27,335

 
15,492

Accrued capital expenditures
 
30,529

 
45,045

Total current liabilities
 
79,164

 
103,400

Long-term liabilities:
 
 
 
 
Long-term debt, net
 
288,298

 
93,199

Asset retirement obligations, net of current portion
 
13,524

 
8,522

Deferred tax liabilities
 
9,278

 
153

Derivative liabilities
 
696

 
8,008

Other liabilities
 
3,658

 
168

Total long-term liabilities
 
315,454

 
110,050

Total liabilities
 
394,618

 
213,450

Commitments and contingencies
 
 
 
 
Mezzanine equity
 
 
 
 
Series B Preferred Stock; $0.0001 par value, 10.0% Redeemable, $1,000 per share liquidation preference; of the 1,000,000 shares of Preferred Stock authorized, 210,000 shares designated, 156,746 and 150,626 shares issued and outstanding as of December 31, 2018 and 2017, respectively
 
155,111

 
140,868

Stockholders’ equity
 
 

 
 

Series A Preferred Stock; $0.0001 par value, 8.0% Cumulative Perpetual Convertible, $1,000 per share liquidation preference; of the 1,000,000 shares of Preferred Stock authorized, 150,000 shares designated, 101,669 and 97,698 shares issued and outstanding as of December 31, 2018 and 2017, respectively
 
84,631

 
80,660

Class A Common Stock; $0.0001 par value, 250,000,000 and 95,000,000 shares authorized at December 31, 2018 and 2017, respectively, and 13,760,136 and 6,222,299 shares issued and outstanding as of December 31, 2018 and 2017, 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 December 31, 2018 and 2017, respectively
 
3

 
3

Additional paid-in capital
 
42,271

 
29,946

Retained earnings
 
26,661

 

Total common stockholders’ equity
 
68,936

 
29,950

Noncontrolling interest
 
113,770

 
12,054

Total stockholders’ equity
 
267,337

 
122,664

Total liabilities, mezzanine and stockholders’ equity
 
$
817,066

 
$
476,982







ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
 
 
Year Ended December 31,
 
 
2018
 
2017
Cash flows from operating activities:
 
 

 
 

Net income (loss)
 
117,962

 
$
(11,948
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 

 
 

Depreciation, depletion, amortization, accretion and impairment of oil and gas properties
 
141,815

 
37,152

Deferred income taxes
 
18,157

 
1,690

Stock-based compensation
 
6,522

 
1,245

(Gain) loss on sale of fixed assets
 
499

 
(4,995
)
(Gain) loss on derivative instruments
 
(92,534
)
 
16,706

Net cash received (paid) in settlement of derivative instruments
 
(14,683
)
 
74

Amortization of debt issuance costs
 
2,139

 
274

Settlement of asset retirement obligations
 
(801
)
 
(840
)
Tax Receivable Agreement Expense
 
3,518

 

Changes in operating assets and liabilities:
 
 
 
 
(Increase) in accounts receivable and accounts receivable, related parties
 
(14,816
)
 
(8,230
)
(Increase) decrease in prepaid and other assets
 
(59
)
 
(451
)
Increase in accounts payable and accrued liabilities and other
 
8,526

 
7,476

Increase (decrease) in accounts payable, related parties
 
64

 
(394
)
Net cash provided by operating activities
 
176,309

 
37,759

Cash flows from investing activities:
 
 

 
 

Additions to oil and natural gas properties
 
(377,897
)
 
(149,832
)
Acquisition of White Wolf
 
(4,005
)
 
(114,843
)
Acquisition of land and leasehold, royalty and mineral interest
 
(15,281
)
 
(6,500
)
Additions to other property and equipment
 
(2,160
)
 
(574
)
Proceeds from sale of other property and equipment
 

 
6,252

Net cash used in investing activities
 
(399,343
)
 
(265,497
)
Cash flows from financing activities:
 
 

 
 

Proceeds from revolving credit facility
 
274,000

 
66,000

Repayment on revolving credit facility
 
(80,000
)
 
(121,000
)
Repayment of long-term debt
 

 

Proceeds from Class A Common Stock offering
 
40,511

 

Class A Common Stock offering issuance costs
 
(1,155
)
 
 
Proceeds from issuance of Series A Preferred Stock and Warrants
 

 
95,000

Series A Preferred Stock issuance costs
 

 
(4,220
)
Proceeds from issuance of Series B Preferred Stock
 

 
150,000

Series B Preferred Stock upfront fees and transaction costs
 
(20
)
 
(10,017
)
Proceeds from Second lien notes, net
 

 
97,000

Net proceeds from the Transaction
 

 
18,688

Distribution to noncontrolling interest
 

 
(40,487
)
Distribution to Tema
 

 
(2,267
)
Debt issuance costs
 
(3,330
)
 
(4,640
)
Dividends paid on preferred stock
 
(10,716
)
 
(38
)
Restricted stock used for tax withholdings
 
(749
)
 

Payment on capital lease obligation
 
(32
)
 
(33
)
Net cash provided by (used in) financing activities
 
218,509

 
243,986

Net increase (decrease) in cash, cash equivalents, and restricted cash
 
(4,525
)
 
16,248

Cash, cash equivalents, and restricted cash beginning of period
 
24,682

 
8,434

Cash, cash equivalents, and restricted cash end of period
 
$
20,157

 
$
24,682








ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)

Supplemental cash flow information and noncash activity:

 
 
Year Ended December 31,
 
 
2018
 
2017
 
2016
Supplemental disclosures:
 
 
 
 
 
 
Cash paid for interest
 
$
17,065

 
$
1,889

 
$
1,794

 
 
 
 
 
 
 
Supplemental noncash activity:
 
 
 
 
 
 
Asset retirement obligations incurred
 
$
4,697

 
$
5,766

 
$
1,641

Net settlement of related party receivable and payable
 

 

 

Changes in accrued capital expenditures
 
14,516

 
42,602

 
(1,434
)
Changes in accounts payable for capital expenditures
 
7,456

 
25,541

 

White Wolf Acquisition escrow deposit
 

 
4,005

 

Series A Preferred Stock dividends paid-in-kind
 
3,971

 
5,530

 

Series A Preferred Stock dividends declared and payable
 
1,015

 

 

Series B Preferred Stock dividends paid-in-kind
 
6,120

 
626

 

Series B Preferred Stock cash dividends declared and payable
 
2,347

 
937

 

Series B Preferred Stock return
 
6,798

 
710

 

Series B Preferred Stock deemed dividend
 
1,345

 
174

 


Reconciliation of cash, cash equivalents and restricted cash presented on the Consolidated Statement of Cash Flows:
 
 
December 31,
 
 
2018
 
2017
 
2016
Cash and cash equivalents
 
$
20,157

 
$
20,677

 
$
8,434

Restricted cash
 

 
4,005

 

Total cash, cash equivalents and restricted cash
 
$
20,157

 
$
24,682

 
$
8,434


As of December 31, 2017, restricted cash was attributable to the White Wolf Acquisition purchase price in an escrow account. The full amount of the escrow account was released to the sellers in March 2018.






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, and amortization, 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, transaction costs incurred in connection with the Transaction and other non-cash operating items. Adjusted EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles (“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 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 loss, the most directly comparable GAAP financial measure.

 
Three Months Ended
 
Twelve Months Ended
 
December 31,
 
September 30,
 
December 31,
 
December 31,
 
December 31,
 
2018
 
2018
 
2017
 
2018
 
2017
 
(In Thousands)
Net income (loss)
$
201,944

 
$
(84,890
)
 
$
(10,746
)
 
$
117,962

 
$
(11,948
)
Interest expense, net
5,597

 
5,363

 
1,258

 
19,489

 
2,532

Income tax expense
12,639

 
22,923

 
2,340

 
18,162

 
1,690

Depreciation, depletion, amortization and accretion
37,031

 
47,469

 
9,941

 
141,815

 
36,091

Impairment of oil and natural gas properties

 

 
1,061

 

 
1,061

Unrealized (gain) loss on commodity derivatives, net
(199,446
)
 
62,315

 
18,142

 
(108,086
)
 
16,553

Transaction costs

 

 

 

 
2,618

Stock settled stock-based compensation
1,203

 
2,052

 
1,070

 
6,477

 
1,245

Exploration costs
715

 
1,348

 
539

 
4,374

 
1,747

(Gain) loss on disposition of property and equipment
174

 
29

 
(4,984
)
 
499

 
(4,995
)
Other non-cash expense, net
3,719

 
105

 
72

 
3,667

 
172

Adjusted EBITDAX
$
63,576

 
$
56,714

 
$
18,693

 
$
204,359

 
$
46,766















PV-10

PV-10 is a non-GAAP financial measures used by management, investors and analysts to estimate the present value, discounted at 10% per annum, of estimated future cash flows of the Company’s estimated proved reserves before income tax and asset retirement obligations. Management believes that PV-10 provides useful information to investors because it is widely used by professional analysts and sophisticated investors in evaluating oil and natural gas companies. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, the Company believes the use of a pre-tax measure is valuable for evaluating the Company. PV-10 should not be considered as an alternative to the standardized measure of discounted future net cash flows as computed under GAAP.

Reserve values
Twelve Months Ended December 31,
(In thousands)
2018
 
2017
Standardized measure of discontinued future net cash flows
$
695,180

 
$
350,065

Discounted future income taxes
47,381

 
17,808

Total proved pre-tax PV-10
$
742,561

 
$
367,873


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, strategy, future operations, financial position, estimated results of operations, future earnings, future capital spending plans, 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 consummate the acquisition, the ultimate timing, outcome and results of integrating the acquired assets into its business and its ability to realize the anticipated benefits, 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 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:

Gary C. Hanna
Craig Owen
Chairman of the Board and
Chief Financial Officer
Interim Chief Executive Officer
281-675-3400
281-675-3400
 
 
 
John Crain
 
Senior Manager, Finance and Investor Relations
 
281-675-3493