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Rosehill Resources Inc. Reports Third Quarter 2019 Results

HOUSTON, November 7, 2019 /Globe Newswire/ -- Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ: ROSE, ROSEW, ROSEU) today reported financial and operational results for the quarter ended September 30, 2019.

Third Quarter 2019 Highlights and Recent Items:

Average net production of 20,576 barrels of oil equivalent (“BOE”) per day (“BOEPD”) (74% oil and 88% total liquids), with September average net production of approximately 23,000 BOEPD

Reported net income attributable to Rosehill of $20.9 million, or $0.88 per diluted share, for the third quarter of 2019, which included a $41.9 million non-cash, pre-tax gain on commodity derivative instruments

Delivered Adjusted EBITDAX (a non-GAAP measure defined and reconciled below) of $49.1 million

Enhanced liquidity through an increase in the borrowing base under the Company’s credit facility to $340 million, up from $300 million

Improved capital efficiency through a 16% decrease in drilling and completion cost per lateral foot for wells drilled thus far in 2019 compared to wells drilled in 2018

Planned additional drilling of four to six Northern Delaware wells late in 2019 supported by continued improvement in well costs, liquidity, and hedge position. Additionally, we expect to place two Northern Delaware Wolfcamp B wells and one Southern Delaware Wolfcamp A well onto production in fourth quarter of 2019

Commodity hedge portfolio value increased to $62.0 million, net as of the end of the quarter

Updated 2019 guidance based on anticipated activity and financial results

Management Comments

David French, Rosehill’s President and Chief Executive Officer, commented, “We continue to focus on operational improvements highlighted in the third quarter by a strong exit production rate and the resumption of drilling operations after a short pause catching up on our completions backlog. Activity in the Northern Delaware featured solid IP30’s of nearly 1,500 BOEPD and 75% oil. In the Southern Delaware, we continue to sharpen our technical edge where our well design is getting a further refinement with optimized landing targets based on newly processed 3D seismic, new offset drilling and completion data, and a thorough outside-in frac modeling peer review. We recognize industry approaches to the area vary, and we believe value will be driven by dedicated and disciplined technical work. We look forward to highlighting results based on the geologic and reservoir characterization work underway.”

“From a 2019 steering standpoint, we recognize the commodity environment has been weaker for gas and NGLs and we have reflected that in our updated EBITDAX guidance. However, we are buoyed by operational results, second half well cost savings, and a depth of portfolio that supports bringing a couple of pads of 2020 wells forward in late 2019. We elected to adjust our 2019 drilling program to keep one rig active through the end of the year, and this puts us in a position to have up to six DUCs around the New Year. We believe continuing limited drilling allows for operational continuity and expands cash flow strength as we cross into 2020. Rosehill looks forward to highlighting the overall 2020 operational picture next month as we roll out our plan.”









Operational Results

For the third quarter of 2019, the Company’s net production averaged 20,576 BOEPD, a 9% increase compared to the average for the second quarter of 2019, comprised of 15,152 barrels of oil per day, 2,848 barrels of natural gas liquids (“NGLs”) per day and 15.5 million cubic feet of gas (“MMCF”) per day. Rosehill drilled one horizontal well, completed 12 wells and had one drilled uncompleted well at the end of the third quarter of 2019.

Northern Delaware - In the Northern Delaware, the Company completed nine wells in the quarter, bringing the total completed well count for the first nine months of 2019 to 15 wells. 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 %
Kyle 26 B007, A001, B001
Lower Wolfcamp A
IP30 (average)
1,470
306
75%
Z&T 32 A005, B006, C006
2nd Bone Spring - Sand
IP30 (average)
961
222
75%
Z&T 20 E006
2nd Bone Spring - Sand
IP180
985
224
70%

For the fourth quarter of 2019, the Company plans to drill four to six additional wells in Northern Delaware and complete these wells early in 2020. The Company currently plans to target the 2nd Bone Spring Sand formation for these wells based on recent positive production results in this formation and lower expected well costs.

Southern Delaware - In the Southern Delaware, the Company completed three wells in the quarter, bringing the total completed well count for the first nine months of 2019 to twelve wells. 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 %
Four Wells Section 14/16 (Hilow, Milow, Silow, Grace)
Wolfcamp A
IP30 (average)
678
116
87%
Silow 14
Wolfcamp A
IP30
924
159
86%
State Neal Lethco 1210
Wolfcamp A
IP90
702
70
91%

Financial Results

For the third quarter of 2019, the Company reported net income attributable to Rosehill of $20.9 million, or $0.88 per diluted share, as compared to a net loss of $31.4 million, or $4.76 per diluted share, in the third quarter of 2018. The third quarter of 2019 included a $41.9 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.

Adjusted EBITDAX totaled $49.1 million for the third quarter of 2019, as compared to $56.7 million in the third quarter of 2018. This decrease of 13% was driven primarily by lower commodity prices and increased lease operating expenses (“LOE”), which more than offset the impact of higher production.

For the third quarter of 2019, average realized prices (all prices excluding the effects of derivatives) were $52.90 per barrel of oil, $0.27 per Mcf of natural gas and $8.10 per barrel of NGLs, resulting in a total equivalent price of $40.28 per BOE, a decrease of 11% from the third quarter of 2018.

The Company’s cash operating costs for the third quarter of 2019 were $12.56 per BOE, which includes LOE, gathering and transportation costs, production taxes and general and administrative expenses, and excludes costs associated with stock-based compensation. Third quarter cash operating costs per BOE increased 10% as compared to the third quarter of 2018, primarily attributable to increased LOE. Third quarter LOE was negatively impacted by workover activities as well as generator costs related to delays in establishing adequate commercial power.





Guidance Update, Capital Expenditures and Liquidity

Based on recent developments, most notably around natural gas & NGL pricing and anticipated activity levels, the Company is providing revised 2019 guidance summarized in the table below.

 
2019
Original
Revised
Guidance
Production (BOEPD)
20,000 - 21,500
20,000- 21,500
Total Capital ($MM)
$220 - $240
$235 - $245
Adjusted EBITDAX ($MM)
$210 - $230
$190 - $210
Debt/TTM Adjusted EBITDAX
1.4x - 1.6x
1.7x - 1.9x

During the third quarter of 2019, Rosehill incurred capital costs, excluding asset retirement costs, of $57.5 million. The portion of capital costs related to facilities during the third quarter of 2019 was $5.5 million. For the first nine months of 2019, Rosehill incurred capital costs, excluding asset retirement costs, of $201.3 million. The portion of capital costs related to facilities and other during the first nine months of 2019 was $30.0 million and $1.9 million, respectively.

On September 30, 2019 the Company’s lenders approved an increase to the borrowing base under the Company's revolving credit facility from $300 million to $340 million. The borrowing base was evaluated using reserve data as of July 1, 2019. As of September 30, 2019, Rosehill had $4.1 million in cash on hand and $365.2 million in long-term debt. Cash on hand and availability under our revolving credit facility was approximately $74 million at September 30, 2019.




Commodity Hedging

Included below is a summary of the Company’s derivative contracts as of September 30, 2019.
 
 
2019
 
2020
 
2021
 
2022
Commodity derivative swaps
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls) (1)(2)
666,000

 
1,000,000

 

 

 
Weighted average fixed price ($/Bbl)
$
53.59

 
$
67.69

 
$

 
$

Natural gas:
 
 
 
 
 
 
 
 
Notional volume (MMBtu)
662,389

 
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)
3,552,696

 

 

 

 
Weighted average fixed price ($/Gallons)
$
0.28

 
$

 
$

 
$

Propane:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
2,368,422

 

 

 

 
Weighted average fixed price ($/Gallons)
$
0.79

 
$

 
$

 
$

Pentanes:
 
 
 
 
 
 
 
 
Notional volume (Gallons)
789,516

 

 

 

 
Weighted average fixed price ($/Gallons)
$
1.47

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Commodity derivative two-way collars
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
105,000

 

 

 

 
Weighted average ceiling price ($/Bbl)
$
60.03

 
$

 
$

 
$

 
Weighted average floor price ($/Bbl)
$
53.14

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Commodity derivative three-way collars
Oil:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
595,364

 
3,294,000

 
4,200,000

 
2,000,000

 
Weighted average ceiling price ($/Bbl)
$
66.19

 
$
70.29

 
$
60.40

 
$
61.45

 
Weighted average floor price ($/Bbl)
$
60.56

 
$
57.50

 
$
54.49

 
$
55.00

 
Weighted average sold put option price ($/Bbl)
$
45.52

 
$
47.50

 
$
45.51

 
$
45.00

 
 
 
 
 
 
 
 
 
Crude oil basis swaps
Midland / Cushing:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
1,366,364

 
5,254,000

 
4,200,000

 
2,100,000

 
Weighted average fixed price ($/Bbl)
$
(4.76
)
 
$
(0.83
)
 
$
0.49

 
$
0.54

 
 
 
 
 
 
 
 
 
Argus WTI roll:
 
 
 
 
 
 
 
 
Notional volume (Bbls)
700,000

 

 

 

 
Weighted average fixed price ($/Bbl)
$
0.56

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
Natural gas basis swaps
EP Permian:
 
 
 
 
 
 
 
 
Notional volume (MMBtu)
690,805

 
2,096,160

 

 

 
Weighted average fixed price ($/MMBtu)
$
(1.10
)
 
$
(1.03
)
 
$

 
$

 
 
 
 
 
 
 
 
 
Interest Rate Swaps:
 
 
 
 
 
 
 
 
Notional principal
$
150,000

 
$
150,000

 
$
150,000

 
$

 
Average fixed rate
1.721
%
 
1.721
%
 
1.721
%
 








(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 third quarter 2019 financial and operating results on Friday, November 8, 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 6572468. 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
 
Nine Months
 
 
Ended September 30,
 
Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 

 
 
 
 

 
 

Oil sales
 
$
73,747

 
$
72,799

 
$
206,440

 
$
197,414

Natural gas sales
 
390

 
2,633

 
1,215

 
6,686

Natural gas liquids sales
 
2,122

 
7,125

 
9,847

 
14,770

Total revenues
 
$
76,259

 
$
82,557

 
$
217,502

 
$
218,870

Average sales price (1):
 
 
 
 
 
 
 
 
Oil (per Bbl)
 
$
52.90

 
$
55.07

 
$
52.22

 
$
58.32

Natural gas (per Mcf)
 
0.27

 
1.82

 
0.26

 
1.87

NGLs (per Bbl)
 
8.10

 
28.16

 
11.95

 
23.98

Total (per Boe)
 
$
40.28

 
$
45.44

 
$
39.20

 
$
47.61

Total, including effects of gain (loss) on settled
 
 
 
 
 
 
 
 
  commodity derivatives, net (per Boe)
 
$
38.97

 
$
42.68

 
$
37.61

 
$
43.87

 
 
 
 
 
 
 
 
 
Net production:
 
 
 
 
 
 
 
 
Oil (MBbls)
 
1,394

 
1,322

 
3,953

 
3,385

Natural gas (MMcf)
 
1,424

 
1,450

 
4,625

 
3,577

NGLs (MBbls)
 
262

 
253

 
824

 
616

Total (MBoe)
 
1,893

 
1,817

 
5,548

 
4,597

Average daily net production volume:
 
 
 
 
 
 
 
 
Oil (Bbls/d)
 
15,152

 
14,370

 
14,480

 
12,399

Natural gas (Mcf/d)
 
15,478

 
15,761

 
16,941

 
13,103

NGLs (Bbls/d)
 
2,848

 
2,750

 
3,018

 
2,256

Total (Boe/d)
 
20,576

 
19,750

 
20,322

 
16,839

Average costs (per BOE):
 
 
 
 
 
 
 
 
Lease operating expenses
 
$
6.45

 
$
5.07

 
$
5.59

 
$
6.38

Production taxes
 
1.86

 
2.22

 
1.80

 
2.29

Gathering and transportation
 
0.47

 
0.73

 
0.82

 
0.71

Depreciation, depletion, amortization and accretion
 
18.24

 
26.12

 
18.59

 
22.79

Exploration costs
 
0.42

 
0.74

 
0.57

 
0.80

General and administrative, excluding stock-based compensation
 
3.78

 
3.45

 
4.08

 
3.92

Stock-based compensation
 
0.90

 
1.14

 
0.83

 
1.17

(Gain) loss on disposition of property and equipment
 

 
0.02

 
(2.00
)
 
0.07

Total (per Boe)
 
$
32.12

 
$
39.49

 
$
30.28

 
$
38.13



(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
 
Nine Months
 
 
Ended September 30,
 
Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 

 
 
 
 

 
 

Oil sales
 
$
73,747

 
$
72,799

 
$
206,440

 
$
197,414

Natural gas sales
 
390

 
2,633

 
1,215

 
6,686

Natural gas liquids sales
 
2,122

 
7,125

 
9,847

 
14,770

Total revenues
 
76,259

 
82,557

 
217,502

 
218,870

Operating expenses:
 
 

 
 

 
 

 
 

Lease operating expenses
 
12,207

 
9,205

 
31,012

 
29,315

Production taxes
 
3,516

 
4,034

 
10,011

 
10,515

Gathering and transportation
 
881

 
1,327

 
4,562

 
3,246

Depreciation, depletion, amortization and accretion
 
34,533

 
47,469

 
103,158

 
104,784

Exploration costs
 
788

 
1,348

 
3,156

 
3,659

General and administrative
 
8,867

 
8,342

 
27,266

 
23,369

(Gain) loss on disposition of property and equipment
 
8

 
29

 
(11,106
)
 
325

Total operating expenses
 
60,800

 
71,754

 
168,059

 
175,213

Operating income
 
15,459

 
10,803

 
49,443

 
43,657

Other income (expense):
 
 

 
 

 
 

 
 

Interest expense, net
 
(7,950
)
 
(5,363
)
 
(19,560
)
 
(13,892
)
Gain (loss) on commodity derivative instruments, net
 
39,368

 
(67,314
)
 
(36,826
)
 
(108,553
)
Other income (expense), net
 
(764
)
 
(93
)
 
(671
)
 
329

Total other income (expense), net
 
30,654

 
(72,770
)
 
(57,057
)
 
(122,116
)
Income (loss) before income taxes
 
46,113

 
(61,967
)
 
(7,614
)
 
(78,459
)
Income tax expense (benefit)
 
(8,995
)
 
22,923

 
(4,172
)
 
5,523

Net income (loss)
 
55,108

 
(84,890
)
 
(3,442
)
 
(83,982
)
Net income (loss) attributable to noncontrolling interest
 
26,185

 
(61,450
)
 
(21,280
)
 
(83,873
)
Net income (loss) attributable to Rosehill Resources Inc. before preferred stock dividends
 
28,923

 
(23,440
)
 
17,838

 
(109
)
Series A Preferred Stock dividends and deemed dividends
 
2,048

 
2,011

 
6,081

 
5,907

Series B Preferred Stock dividends, deemed dividends, and return
 
5,955

 
5,917

 
17,626

 
17,494

Net income (loss) attributable to Rosehill Resources Inc. common stockholders
 
$
20,920

 
$
(31,368
)
 
$
(5,869
)
 
$
(23,510
)
Earnings (loss) per common share:
 
 

 
 

 
 

 
 

Basic
 
$
1.45

 
$
(4.76
)
 
$
(0.41
)
 
$
(3.66
)
Diluted
 
$
0.88

 
$
(4.76
)
 
$
(0.67
)
 
$
(3.66
)
Weighted average common shares outstanding:
 
 

 
 

 
 

 
 

Basic
 
14,451

 
6,592

 
14,223

 
6,416

Diluted
 
53,100

 
6,592

 
44,031

 
6,416






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

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
4,132

 
$
20,157

Accounts receivable
 
37,351

 
32,260

Accounts receivable, related parties
 

 
78

Derivative assets
 
15,931

 
30,819

Prepaid and other current assets
 
2,051

 
1,371

Total current assets
 
59,465

 
84,685

Property and equipment:
 
 

 
 

Oil and natural gas properties (successful efforts), net
 
754,285

 
666,797

Other property and equipment, net
 
2,621

 
2,592

Total property and equipment, net
 
756,906

 
669,389

Other assets, net
 
3,675

 
4,678

Derivative assets
 
46,027

 
58,314

Total assets
 
$
866,073

 
$
817,066

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
 
 
 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
12,826

 
$
21,013

Accounts payable, related parties
 
1,144

 
287

Derivative liabilities
 
117

 

Accrued liabilities and other
 
29,808

 
27,335

Accrued capital expenditures
 
24,804

 
30,529

Total current liabilities
 
68,699

 
79,164

Long-term liabilities:
 
 
 
 
Long-term debt, net
 
365,196

 
288,298

Asset retirement obligations
 
14,178

 
13,524

Deferred tax liabilities
 
5,107

 
9,278

Derivative liabilities
 
1,797

 
696

Other liabilities
 
3,645

 
3,658

Total long-term liabilities
 
389,923

 
315,454

Total liabilities
 
458,622

 
394,618

 
 
 
 
 
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 September 30, 2019 and December 31, 2018
 
161,012

 
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, 103,717 and 101,699 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
 
86,679

 
84,631

Class A Common Stock; $0.0001 par value, 250,000,000 shares authorized and 14,451,367 and 13,760,136 shares issued and outstanding as of September 30, 2019 and December 31, 2018, 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 September 30, 2019 and December 31, 2018
 
3

 
3

Additional paid-in capital
 
36,538

 
42,271

Retained earnings
 
28,606

 
26,661

Total common stockholders’ equity
 
65,148

 
68,936

Noncontrolling interest
 
94,612

 
113,770

Total stockholders’ equity
 
246,439

 
267,337

Total liabilities, mezzanine equity and stockholders’ equity
 
$
866,073

 
$
817,066




ROSEHILL RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 

Net loss
 
$
(3,442
)
 
$
(83,982
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 

Depreciation, depletion, amortization and accretion
 
103,158

 
104,784

Deferred income taxes
 
(4,172
)
 
5,523

Stock-based compensation
 
4,629

 
5,364

(Gain) loss on disposition of property and equipment
 
(11,106
)
 
325

Loss on derivative instruments
 
37,912

 
108,500

Net cash paid in settlement of derivative instruments
 
(9,519
)
 
(17,193
)
Amortization of debt issuance costs
 
1,433

 
1,723

Settlement of asset retirement obligations
 
(7
)
 
(551
)
Changes in operating assets and liabilities:
 
 
 
 
Increase in accounts receivable and accounts receivable, related parties
 
(5,005
)
 
(22,412
)
(Increase) decrease in prepaid and other assets
 
587

 
(176
)
Increase in accounts payable and accrued liabilities and other
 
762

 
14,828

Increase (decrease) in accounts payable, related parties
 
857

 
(211
)
Net cash provided by operating activities
 
116,087

 
116,522

Cash flows from investing activities:
 
 

 
 

Additions to oil and natural gas properties
 
(211,796
)
 
(292,955
)
Acquisition of White Wolf
 

 
(4,005
)
Acquisition of land and leasehold, royalty and mineral interest
 
(1,175
)
 
(15,245
)
Proceeds received - Tatanka Asset sale
 
21,770

 

Additions to other property and equipment
 
(683
)
 
(1,834
)
Net cash used in investing activities
 
(191,884
)
 
(314,039
)
Cash flows from financing activities:
 
 

 
 

Proceeds from revolving credit facility
 
108,000

 
274,000

Repayment on revolving credit facility
 
(32,000
)
 
(80,000
)
Debt issuance costs
 
(799
)
 
(2,497
)
Dividends paid on preferred stock
 
(15,169
)
 
(7,388
)
Restricted stock used for tax withholdings
 
(246
)
 
(258
)
Payment on capital lease obligation
 
(14
)
 
(21
)
Net cash provided by financing activities
 
59,772

 
183,836

Net decrease in cash, cash equivalents, and restricted cash
 
(16,025
)
 
(13,681
)
Cash and cash equivalents beginning of period
 
20,157

 
24,682

Cash and cash equivalents end of period
 
$
4,132

 
$
11,001







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

Supplemental cash flow information and noncash activity:

 
 
Nine Months Ended September 30,
 
 
2019
 
2018
Supplemental disclosures:
 
 
 
 
Cash paid for interest
 
$
17,600

 
$
10,160

 
 
 
 
 
Supplemental noncash activity:
 
 
 
 
Asset retirement obligations incurred, net of revision of estimates
 
$
268

 
$
4,367

Changes in accrued capital expenditures
 
(5,725
)
 
(2,035
)
Changes in accounts payable for capital expenditures
 
(7,243
)
 
(7,662
)
Series A Preferred Stock dividends paid-in-kind
 
2,048

 
2,955

Series A Preferred Stock cash dividends declared and payable
 

 
1,005

Series B Preferred Stock dividends paid-in-kind
 

 
4,554

Series B Preferred Stock cash dividends declared and payable
 
3,951

 
2,323

Series B Preferred Stock return
 
4,771

 
5,130

Series B Preferred Stock deemed dividend
 
1,130

 
984









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
 
 
 
 
 
 
September 30,
 
June 30,
 
September 30,
 
 
 
2019
 
2019
 
2018
 
Revised Guidance
 
(In thousands)
Net income (loss)
$
55,108

 
$
45,522

 
$
(84,890
)
 
$
15,000

 
-
$
20,000

Interest expense, net
7,950

 
6,010

 
5,363

 
25,000

 
-
27,000

Income tax expense (benefit)
(8,995
)
 
1,517

 
22,923

 
(3,000
)
 
-
(5,000
)
Depreciation, depletion, amortization and accretion
34,533

 
32,661

 
47,469

 
140,000

 
-
145,000

Unrealized (gain) loss on commodity derivatives, net
(41,852
)
 
(33,723
)
 
62,315

 
15,000

 
-
24,000

Stock settled stock-based compensation
1,710

 
1,765

 
2,052

 
5,000

 
-
7,000

Exploration costs
788

 
1,113

 
1,348

 
3,000

 
-
4,000

(Gain) loss on disposition of property and equipment
8

 
(11,123
)
 
29

 
(10,000
)
 
-
(12,000
)
Other non-cash (income) expense, net
(103
)
 
58

 
105

 

 
 

Adjusted EBITDAX
$
49,147

 
$
43,800

 
$
56,714

 
$
190,000

 
-
$
210,000







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