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Rosehill Resources Inc. Reports Second Quarter 2019 Results

HOUSTON, August 8, 2019 /Globe Newswire/ -- Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ: ROSE, ROSEW, ROSEU) today reported financial and operational results for the quarter ended June 30, 2019.

Second Quarter 2019 Highlights and Recent Items:

Average net production of 18,934 barrels of oil equivalent (“BOE”) per day (“BOEPD”) (70% oil and 85% total liquids), an increase of 3% compared to the second quarter of 2018

Reported net income attributable to Rosehill of $11.2 million, or $0.54 per diluted share, for the second quarter of 2019, which included a $33.7 million non-cash, pre-tax gain on commodity derivative instruments

Delivered Adjusted EBITDAX (a non-GAAP measure defined and reconciled below) of $43.8 million, a decrease of 11% over the second quarter of 2018

Continued Southern Delaware success including the Silow 14 well, which achieved an average initial rate over a 7-day period (“IP7”) of 1,069 BOEPD, or 184 BOEPD per 1,000 feet, and 93% oil. The State Neal Lethco 1210 well, the first well drilled on the Company’s recent acreage expansion, achieved an average initial rate over a 30-day period (“IP30”) of 1,018 BOEPD, or 102 BOEPD per 1,000 feet, and 92% oil

Reduced cash operating cost (lease operating expense (“LOE”), gathering and transportation, production taxes and general and administrative expenses excluding costs associated with stock-based compensation) per BOE by $1.62, or 12% compared to the second quarter of 2018

Placed 10 wells onto production in the second quarter of 2019 with the production impact from these wells mostly occurring near the end of the period. Average net production for July 2019 is estimated to be over 20,000 BOEPD on a two-stream basis

Continued to generate strong corporate returns, achieving a 23% cash return on capital invested (“CROCI”, a non-GAAP measure defined and calculated below) for the second quarter of 2019

Management Comments

David French, Rosehill’s President and Chief Executive Officer, commented, “It was a very active quarter in both of our operating areas as we balanced accelerating our pace of commercialization in the Southern Delaware, and steady development within the heart of the Northern Delaware Our production levels responded as predicted towards the end of quarter as wells shut-in for simultaneous operations were placed back on production. We remain confident in the production guidance for 2019 given the strength of our drilled uncompleted (“DUC”) inventory, and the solid production levels from the second quarter activity.”

“We are pleased to announce additional well results for our Southern Delaware area, including IP30 rates for our first well within the recently announced acreage expansion. This is also Rosehill’s first two-mile lateral. Even though our development plan was front-end loaded to the first half of the year, we are planning additional drilling in the Southern Delaware in 2019. The Northern Delaware saw six wells drilled and completed with ongoing completion operations on our nine well DUC inventory in this area. We anticipate noteworthy contribution from these wells to our production profile in the second half of 2019, and look forward to providing future updates. We are excited about the choices in our portfolio and continue to stay focused on delivering quality, predictable results.”








Operational Results

For the second quarter of 2019, the Company’s net production averaged 18,934 BOEPD, a 12% decrease compared to the average for the first quarter of 2019, comprised of 13,341 barrels of oil per day, 2,912 barrels of natural gas liquids (“NGLs”) per day and 16.1 million cubic feet of gas (“MMCF”) per day. Production in the quarter was negatively impacted by wells shut-in due to simultaneous operations. In total, ten wells were shut-in for certain periods during the quarter with an estimated total production impact of over 1,200 BOEPD for the quarter. Rosehill drilled eight horizontal wells, completed nine wells and had 12 DUCs at the end of the second quarter of 2019.

Southern Delaware - In the Southern Delaware, the Company completed three wells in the quarter, bringing the total completed well count for the first six months of 2019 to nine wells. During the second quarter, the Company placed the State Neal Lethco 1210 on to production, the first well completed as part of the recently announced acreage expansion. The results for certain recently connected wells, along with additional results for wells previously reported, are presented in the table below.

 
 
 
 
BOEPD per
 
Well
Formation
Period
BOEPD
1,000’ LL
Oil %
State Blanco 58 G003, H001, G001
Wolfcamp A&B
IP30 (average)
631
155
91%
Trees Estate 77 A001, H001, H003
Wolfcamp A&B
IP30 (average)
651
142
91%
State Neal Lethco 1210
Wolfcamp B
IP30
1,018
102
92%
Silow 14
Wolfcamp B
IP7
1,069
184
93%

Northern Delaware - In the Northern Delaware, the Company completed six wells in the second quarter. The results for certain recently connected wells, along with additional results for wells previously reported, are presented in the table below.

 
 
 
 
BOEPD per
 
Well
Formation
Period
BOEPD
1,000’ LL
Oil %
Z&T 32 E001, F002, G003
Lower Wolfcamp A
IP180 (average)
1,189
259
65%
Z&T 20 E006
2nd Bone Spring - Sand
IP30
1,144
260
72%

For the second half of 2019, the Company is considering drilling several wells to further delineate the Wolfcamp B section in its Northern Delaware area. Based on the thickness of the interval and the positive results of previously drilled wells, the Company believes there is significant economic inventory potential within the Wolfcamp B interval.

Financial Results

For the second quarter of 2019, the Company reported net income attributable to Rosehill of $11.2 million, or $0.54 per diluted share, as compared to net income of $9.2 million, or a $0.32 loss per diluted share, in the second quarter of 2018. The second quarter of 2019 included a $33.7 million non-cash, pre-tax gain on commodity derivative instruments compared to a $20.0 million non-cash, pre-tax loss on commodity derivative instruments in the second quarter of 2018.

Adjusted EBITDAX totaled $43.8 million for the second quarter of 2019, as compared to $49.2 million in the second quarter of 2018. This decrease of 11% was driven primarily by lower commodity prices, which more than offset the impact of lower per unit operating expenses and higher production.

For the second quarter of 2019, average realized prices (all prices excluding the effects of derivatives) were $55.06 per barrel of oil, $(0.44) per Mcf of natural gas and $12.05 per barrel of NGLs, resulting in a total equivalent price of $40.27 per BOE, a decrease of 16% from the second quarter of 2018.

The Company’s cash operating costs for the second quarter of 2019 were $11.72 per BOE, which includes LOE, gathering and transportation costs, production taxes and general and administrative expenses, and excludes costs associated with stock-based compensation. Second quarter cash operating costs per BOE decreased 12% as compared to the second quarter of 2018, primarily attributable to lower LOE. Second quarter LOE was positively impacted by lower salt water disposal (“SWD”) costs in the Southern Delaware area. The Company brought online a company owned and operated SWD well in the Southern Delaware area which allowed for less reliance on more costly third-party SWD disposal services.



Capital Expenditures and Liquidity

During the second quarter of 2019, Rosehill incurred capital costs, excluding asset retirement costs, of $71.9 million. The portion of capital costs related to facilities during the second quarter of 2019 was $11.2 million. For the first six months of 2019, Rosehill incurred capital costs, excluding asset retirement costs, of $144.5 million. The portion of capital costs related to facilities and other during the first six months of 2019 was $24.5 million and $1.2 million, respectively.

As previously announced, the Company expects lower drilling and completions activity in the second half of 2019 compared to the first half of 2019, which is expected to result in lower capital costs. The Company continues to expect its results for full year 2019 to be in line with previously provided estimates.

As of June 30, 2019, Rosehill had $4.7 million in cash on hand and $334.9 million in long-term debt. As of June 30, 2019, cash on hand and availability under our revolving credit facility was approximately $65 million.



Commodity Hedging

Included below is a summary of the Company’s derivative contracts as of June 30, 2019.
 
 
2019
 
2020
 
2021
 
2022
Commodity derivative swaps
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls) (1)(2)
1,332,000

 
1,960,000

 

 

 
Weighted average fixed price ($/Bbl)
$
53.59

 
$
60.09

 
$

 
$

Natural gas:
 
 
 
 
 
 
 
 
Notional volume (MMBtu)
1,682,646

 
1,970,368

 
1,615,792

 
1,276,142

 
Weighted average fixed price ($/MMbtu)
$
2.87

 
$
2.75

 
$
2.79

 
$
2.85

Ethane:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
7,027,524

 

 

 

 
Weighted average fixed price ($/Gallons)
$
0.28

 
$

 
$

 
$

Propane:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
4,685,058

 

 

 

 
Weighted average fixed price ($/Gallons)
$
0.79

 
$

 
$

 
$

Pentanes:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
1,561,896

 

 

 

 
Weighted average fixed price ($/Gallons)
$
1.47

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Commodity derivative two-way collars
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
210,000

 

 

 

 
Weighted average ceiling price ($/Bbl)
$
60.03

 
$

 
$

 
$

 
Weighted average floor price ($/Bbl)
$
53.14

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Commodity derivative three-way collars
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
1,095,258

 
3,294,000

 
4,200,000

 
2,000,000

 
Weighted average ceiling price ($/Bbl)
$
65.86

 
$
70.29

 
$
60.40

 
$
61.45

 
Weighted average floor price ($/Bbl)
$
60.61

 
$
57.50

 
$
54.49

 
$
55.00

 
Weighted average sold put option price ($/Bbl)
$
45.57

 
$
47.50

 
$
45.51

 
$
45.00

 
 
 
 
 
 
 
 
 
Crude oil basis swaps
Midland / Cushing:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
2,637,258

 
5,254,000

 
3,160,000

 
2,100,000

 
Weighted average fixed price ($/Bbl)
$
(4.65
)
 
$
(0.83
)
 
$
0.48

 
$
0.54

 
 
 
 
 
 
 
 
 
Natural gas basis swaps
EP Permian:
 
 
 
 
 
 
 
 
Notional volume (MMBtu)
1,711,062

 
2,096,160

 

 

 
Weighted average fixed price ($/MMBtu)
$
(1.13
)
 
$
(1.03
)
 
$

 
$


(1)
During the second quarter of 2019, the Company entered into commodity derivative swaps where it bought 2,160,000 barrels of crude oil at a weighted average fixed price of $50.48 per barrel to offset commodity derivative swaps it previously sold of 2,160,000 barrels of crude oil at a weighted average fixed price of $61.21 per barrel, effectively locking in a gain of approximately $23.2 million that the Company expects to recognize in 2021 when the swaps settle.

(2)
During the second quarter of 2019, the Company entered into commodity derivative swaps where it bought 1,100,000 barrels of crude oil at a weighted average fixed price of $50.55 per barrel to offset commodity derivative swaps it previously sold of 1,100,000 barrels of crude oil at a weighted average fixed price of $58.42 per barrel, effectively locking in a gain of approximately $8.7 million that the Company expects to recognize in 2022 when the swaps settle.




Conference Call, Webcast and Presentation

The Company will hold a conference call to discuss its second quarter 2019 financial and operating results on Friday, August 9, 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 9388804. The call will also be available as a live webcast on the “News/Events” tab of the Investors section of the Company’s website, www.rosehillresources.com. The webcast will be available for replay for at least 30 days. An updated investor presentation in conjunction with this earnings release will be available on the Company’s website under the Investor Relations section.


About Rosehill Resources Inc.

Rosehill Resources Inc. is an independent oil and gas exploration company with assets positioned in the Delaware Basin portion of the Permian Basin. The Company’s strategy includes the focused development of its multi-bench assets in the Northern Delaware Basin and the Southern Delaware Basin, as well as adding economic drilling inventory to support future growth.


Rosehill Resources Inc.
Operational Highlights
(Unaudited)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues: (in thousands)
 
 
 
 
 
 
 
 
Oil sales
 
$
66,840

 
$
73,061

 
$
132,693

 
$
124,615

Natural gas sales
 
(649
)
 
2,308

 
825

 
4,053

NGL sales
 
3,192

 
5,158

 
7,725

 
7,645

Total revenues
 
$
69,383

 
$
80,527

 
$
141,243

 
$
136,313

Average sales price (1):
 
 
 
 
 
 
 
 
Oil (per Bbl)
 
$
55.06

 
$
60.18

 
$
51.85

 
$
60.40

Natural gas (per Mcf)
 
(0.44
)
 
1.68

 
0.26

 
1.91

NGLs (per Bbl)
 
12.05

 
22.04

 
13.75

 
21.06

Total (per Boe)
 
$
40.27

 
$
48.02

 
$
38.64

 
$
49.02

Total, including effects of gain (loss) on settled commodity derivatives, net (per Boe)
 
$
37.17

 
$
42.56

 
$
36.90

 
$
44.63

Net Production:
 
 
 
 
 
 
 
 
Oil (MBbls)
 
1,214

 
1,214

 
2,559

 
2,063

Natural gas (MMcf)
 
1,462

 
1,375

 
3,201

 
2,127

NGLs (MBbls)
 
265

 
234

 
562

 
363

Total (MBoe)
 
1,723

 
1,677

 
3,655

 
2,781

Average daily net production volume:
 
 
 
 
 
 
 
 
Oil (Bbls/d)
 
13,341

 
13,341

 
14,138

 
11,398

Natural gas (Mcf/d)
 
16,066

 
15,110

 
17,685

 
11,751

NGLs (Bbls/d)
 
2,912

 
2,571

 
3,105

 
2,006

Total (Boe/d)
 
18,934

 
18,429

 
20,193

 
15,365

Average costs (per BOE):
 
 
 
 
 
 
 
 
Lease operating expenses
 
$
4.90

 
$
6.69

 
$
5.15

 
$
7.23

Production taxes
 
1.74

 
2.29

 
1.78

 
2.33

Gathering and transportation
 
0.77

 
0.72

 
1.01

 
0.69

Depreciation, depletion, amortization and accretion
 
18.96

 
21.77

 
18.78

 
20.61

Exploration costs
 
0.65

 
1.12

 
0.65

 
0.83

General and administrative, excluding stock-based compensation
 
4.31

 
3.64

 
4.23

 
4.22

Stock-based compensation
 
1.11

 
1.09

 
0.80

 
1.18

(Gain) loss on disposition of property and equipment
 
(6.46
)
 
0.10

 
(3.04
)
 
0.11

Total (per Boe)
 
$
25.98

 
$
37.42

 
$
29.36

 
$
37.20


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



ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
 
 
Three Months
 
Six Months
 
 
Ended June 30,
 
Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 

 
 
 
 

 
 

Oil sales
 
$
66,840

 
$
73,061

 
$
132,693

 
$
124,615

Natural gas sales
 
(649
)
 
2,308

 
825

 
4,053

Natural gas liquids sales
 
3,192

 
5,158

 
7,725

 
7,645

Total revenues
 
69,383

 
80,527

 
141,243

 
136,313

Operating expenses:
 
 

 
 

 
 

 
 

Lease operating expenses
 
8,435

 
11,225

 
18,805

 
20,110

Production taxes
 
2,992

 
3,841

 
6,495

 
6,481

Gathering and transportation
 
1,320

 
1,207

 
3,681

 
1,919

Depreciation, depletion, amortization and accretion
 
32,661

 
36,506

 
68,625

 
57,315

Exploration costs
 
1,113

 
1,875

 
2,368

 
2,311

General and administrative
 
9,344

 
7,930

 
18,399

 
15,027

(Gain) loss on disposition of property and equipment
 
(11,123
)
 
163

 
(11,114
)
 
296

Total operating expenses
 
44,742

 
62,747

 
107,259

 
103,459

Operating income
 
24,641

 
17,780

 
33,984

 
32,854

Other income (expense):
 
 

 
 

 
 

 
 

Interest expense, net
 
(6,010
)
 
(4,662
)
 
(11,610
)
 
(8,529
)
Gain (loss) on commodity derivative instruments, net
 
28,377

 
(19,954
)
 
(76,194
)
 
(41,239
)
Other income, net
 
31

 
290

 
93

 
422

Total other income (expense), net
 
22,398

 
(24,326
)
 
(87,711
)
 
(49,346
)
Income (loss) before income taxes
 
47,039

 
(6,546
)
 
(53,727
)
 
(16,492
)
Income tax expense (benefit)
 
1,517

 
(15,210
)
 
4,823

 
(17,400
)
Net income (loss)
 
45,522

 
8,664

 
(58,550
)
 
908

Net income (loss) attributable to noncontrolling interest
 
26,444

 
(8,347
)
 
(47,465
)
 
(22,423
)
Net income (loss) attributable to Rosehill Resources Inc. before preferred stock dividends
 
19,078

 
17,011

 
(11,085
)
 
23,331

Series A Preferred Stock dividends and deemed dividends
 
2,027

 
1,968

 
4,033

 
3,897

Series B Preferred Stock dividends, deemed dividends, and return
 
5,863

 
5,844

 
11,671

 
11,576

Net income (loss) attributable to Rosehill Resources Inc. common stockholders
 
$
11,188

 
$
9,199

 
$
(26,789
)
 
$
7,858

Earnings (loss) per common share:
 
 

 
 

 
 

 
 

Basic
 
$
0.78

 
$
1.43

 
$
(1.90
)
 
$
1.24

Diluted
 
$
0.54

 
$
(0.32
)
 
$
(1.90
)
 
$
(0.70
)
Weighted average common shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
14,382

 
6,430

 
14,108

 
6,327

Diluted
 
24,562

 
36,238

 
14,108

 
36,135







ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share amounts)
 
 
June 30, 2019
 
December 31, 2018
ASSETS
 
 
 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
4,684

 
$
20,157

Accounts receivable
 
26,810

 
32,260

Accounts receivable, related parties
 

 
78

Derivative assets
 
3,352

 
30,819

Prepaid and other current assets
 
1,936

 
1,371

Total current assets
 
36,782

 
84,685

Property and equipment:
 
 

 
 

Oil and natural gas properties (successful efforts), net
 
731,636

 
666,797

Other property and equipment, net
 
2,251

 
2,592

Total property and equipment, net
 
733,887

 
669,389

Other assets, net
 
5,591

 
4,678

Derivative assets
 
29,464

 
58,314

Total assets
 
$
805,724

 
$
817,066

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
 
 
 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
20,961

 
$
21,013

Accounts payable, related parties
 
63

 
287

Derivative liabilities
 
11,755

 

Accrued liabilities and other
 
27,570

 
27,335

Accrued capital expenditures
 
22,813

 
30,529

Total current liabilities
 
83,162

 
79,164

Long-term liabilities:
 
 
 
 
Long-term debt, net
 
334,889

 
288,298

Asset retirement obligations
 
13,709

 
13,524

Deferred tax liabilities
 
14,101

 
9,278

Derivative liabilities
 
1,627

 
696

Other liabilities
 
3,652

 
3,658

Total long-term liabilities
 
367,978

 
315,454

Total liabilities
 
451,140

 
394,618

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 shares issued and outstanding as of June 30, 2019 and December 31, 2018
 
159,008

 
155,111

Stockholders’ equity
 
 

 
 

Series A Preferred Stock; $0.0001 par value, 8.0% Cumulative Perpetual Convertible, $1,000 per share liquidation preference; of the 1,000,000 shares of Preferred Stock authorized, 150,000 shares designated, 101,669 shares issued and outstanding as of June 30, 2019 and December 31, 2018
 
84,631

 
84,631

Class A Common Stock; $0.0001 par value, 250,000,000 shares authorized and 14,450,980 and 13,760,136 shares issued and outstanding as of June 30, 2019 and December 31, 2018
 
1

 
1

Class B Common Stock; $0.0001 par value, 30,000,000 shares authorized, 29,807,692 shares issued and outstanding as of June 30, 2019 and December 31, 2018
 
3

 
3

Additional paid-in capital
 
35,957

 
42,271

Retained earnings
 
7,686

 
26,661

Total common stockholders’ equity
 
43,647

 
68,936

Noncontrolling interest
 
67,298

 
113,770

Total stockholders’ equity
 
195,576

 
267,337

Total liabilities, mezzanine and stockholders’ equity
 
$
805,724

 
$
817,066




ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)

 
 
Six Months Ended June 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 

Net income (loss)
 
$
(58,550
)
 
$
908

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 

Depreciation, depletion, amortization, accretion and impairment of oil and gas properties
 
68,625

 
57,315

Deferred income taxes
 
4,823

 
(17,400
)
Stock-based compensation
 
2,924

 
3,288

(Gain) loss on disposition of property and equipment
 
(11,114
)
 
296

Loss on derivative instruments
 
76,170

 
41,082

Net cash paid in settlement of derivative instruments
 
(7,167
)
 
(12,194
)
Amortization of debt issuance costs
 
906

 
1,319

Settlement of asset retirement obligations
 
(8
)
 
(283
)
Changes in operating assets and liabilities:
 
 
 
 
(Increase) decrease in accounts receivable and accounts receivable, related parties
 
5,533

 
(11,976
)
Increase in prepaid and other assets
 
(565
)
 
(369
)
Increase (decrease) in accounts payable and accrued liabilities and other
 
(4,600
)
 
12,056

Increase (decrease) in accounts payable, related parties
 
(224
)
 
553

Net cash provided by operating activities
 
76,753

 
74,595

Cash flows from investing activities:
 
 

 
 

Additions to oil and natural gas properties
 
(148,861
)
 
(204,275
)
Acquisition of White Wolf
 

 
(4,005
)
Acquisition of land and leasehold, royalty and mineral interest
 
(1,133
)
 
(14,725
)
Proceeds received - Tatanka Asset sale
 
22,000

 

Additions to other property and equipment
 
(88
)
 
(1,634
)
Net cash used in investing activities
 
(128,082
)
 
(224,639
)
Cash flows from financing activities:
 
 

 
 

Proceeds from revolving credit facility
 
66,000

 
213,000

Repayment on revolving credit facility
 
(20,000
)
 
(68,000
)
Debt issuance costs
 
(658
)
 
(2,380
)
Dividends paid on preferred stock
 
(9,232
)
 
(4,129
)
Restricted stock used for tax withholdings
 
(247
)
 
(261
)
Payment on capital lease obligation
 
(7
)
 
(13
)
Net cash provided by financing activities
 
35,856

 
138,217

Net decrease in cash, cash equivalents, and restricted cash
 
(15,473
)
 
(11,827
)
Cash and cash equivalents beginning of period
 
20,157

 
24,682

Cash and cash equivalents end of period
 
$
4,684

 
$
12,855






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

Supplemental cash flow information and noncash activity:

 
 
Six Months Ended June 30,
 
 
2019
 
2018
Supplemental disclosures:
 
 
 
 
Cash paid for interest
 
$
8,954

 
$
3,748

 
 
 
 
 
Supplemental noncash activity:
 
 
 
 
Asset retirement obligations incurred
 
$
(7
)
 
$
2,793

Changes in accrued capital expenditures
 
(7,716
)
 
(16,971
)
Changes in accounts payable for capital expenditures
 
1,211

 
3,161

Series A Preferred Stock dividends paid-in-kind
 

 
1,949

Series A Preferred Stock cash dividends declared and payable
 
2,027

 
984

Series B Preferred Stock dividends paid-in-kind
 

 
3,004

Series B Preferred Stock cash dividends declared and payable
 
3,908

 
2,275

Series B Preferred Stock return
 
3,156

 
3,438

Series B Preferred Stock deemed dividend
 
741

 
631





Non-GAAP Measures

Adjusted EBITDAX

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by Rosehill’s management and external users of Rosehill’s financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net income (loss) before interest expense, income taxes, depreciation, depletion, amortization, and accretion and impairment of oil and natural gas properties, (gains) losses on commodity derivatives excluding net cash receipts (payments) on settled commodity derivatives, gains and losses from the sale of assets, exploration costs, and other non-cash operating items. Adjusted EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles (“U.S. GAAP”).

Management believes Adjusted EBITDAX is useful because it allows for more effective evaluation and comparison of Rosehill’s operating performance and results of operations from period to period without regard to the Company’s financing methods or capital structure. Rosehill excludes the items listed above from net income in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within the industry depending upon accounting methods and book values of assets, capital structures, and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with U.S. GAAP or as an indicator of the Company’s operating performance or liquidity. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. Rosehill’s computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

We have provided below a reconciliation of Adjusted EBITDAX to net income (loss), the most directly comparable U.S. GAAP financial measure.

 
Three Months Ended
 
Twelve Months Ended
 
June 30,
 
March 31,
 
June 30,
 
June 30,
 
June 30,
 
2019
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Net income (loss)
$
45,522

 
$
(104,072
)
 
$
8,664

 
$
58,504

 
$
(14,040
)
Interest expense, net
6,010

 
5,600

 
4,662

 
22,570

 
10,087

Income tax expense (benefit)
1,517

 
3,306

 
(15,210
)
 
40,385

 
(15,983
)
Depreciation, depletion, amortization and accretion
32,661

 
35,964

 
36,506

 
153,125

 
75,639

Impairment of oil and natural gas properties

 

 

 

 
1,061

Unrealized (gain) loss on commodity derivatives, net
(33,723
)
 
103,548

 
10,803

 
(67,306
)
 
49,110

Transaction costs

 

 

 

 
149

Stock settled stock-based compensation
1,765

 
974

 
1,760

 
5,994

 
4,467

Exploration costs
1,113

 
1,255

 
1,875

 
4,431

 
3,284

(Gain) loss on disposition of property and equipment
(11,123
)
 
9

 
163

 
(10,911
)
 
(4,688
)
Other non-cash (income) expense, net
58

 
(81
)
 
(57
)
 
3,801

 
49

Adjusted EBITDAX
$
43,800

 
$
46,503

 
$
49,166

 
$
210,593

 
$
109,135




















Cash return on capital invested (“CROCI”) is a non-GAAP financial measure calculated by dividing the trailing twelve month Adjusted EBITDAX (a non-GAAP financial measure reconciled above) by average gross property and equipment.  Management believes CROCI is useful as a measure of the profitability of capital employed and long-term company and management performance.

We have provided the calculation for our CROCI below.

 
June 30,
 
June 30,
 
June 30,
 
2019
 
2018
 
2017
 
(In thousands)
Twelve months ending Adjusted EBITDAX
$
210,593

 
$
109,135

 
 
 
 
 
 
 
 
Proved oil and natural gas properties
$
910,705

 
$
620,793

 
$
312,368

Unproved oil and natural gas properties
119,225

 
131,934

 
533

Land
1,575

 
971

 
406

Other property and equipment
6,094

 
5,559

 
3,566

Total property and equipment, gross
$
1,037,599

 
$
759,257

 
$
316,873

 
 
 
 
 
 
Average property and equipment, gross (1)
$
898,428

 
$
538,065

 
 
 
 
 
 
 
 
CROCI
23
%
 
20
%
 
 

(1) For the period ended June 30, 2019, the average property and equipment, gross was calculated using the total property and equipment, gross for the period ended June 30, 2019 and June 30, 2018. For the period ended June 30, 2018, the average property and equipment, gross was calculated using the total property and equipment, gross for the period ended June 30, 2018 and June 30, 2017.






Forward-Looking Statements

This communication includes certain statements that may constitute “forward-looking statements” for purposes of the federal securities laws. All statements, other than statements of historical fact included in this communication, regarding Rosehill’s opportunities in the Delaware Basin, including inventory potential within the Wolfcamp B interval, strategy, future operations, expected drilling and completions activity, financial position, estimated results of operations, future earnings, future capital spending plans, expected gains from settling derivatives, prospects, plans and objectives of management are forward-looking statements. When used in this communication, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “guidance,” “forecast” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

You should not place undue reliance on these forward-looking statements. Although the Company believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements in this communication are reasonable, no assurance can be given that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to, the Company’s ability to realize the anticipated benefits of its drilling and completion activities, commodity price volatility, inflation, lack of availability of drilling and completion equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating oil and natural gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other  risks and uncertainties discussed under the section titled “Risk Factors” in the Company’s Form 10-K, and in other public filings with the Securities and Exchange Commission (the “SEC”) by the Company. The Company’s SEC filings are available publicly on the SEC’s website at www.sec.gov. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. All forward-looking statements speak only as of the date of this communication.  Except as otherwise required by applicable law, the Company disclaims any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this communication.


Contact Information:

David L. French
Craig Owen
President and Chief Executive Officer
Senior Vice President and Chief Financial Officer
281-675-3400
281-675-3400
 
 
John Crain
 
Director of Investor Relations
 
281-675-3493