Roan Resources reports $300 million 3Q loss but increased production following reorganization


Third quarter 2018 results for Oklahoma City’s Roan Resources, Inc. were announced Tuesday showing a net loss of more than $300 million following its reorganization.

The company went through a reorganization process to form publicly traded Roan Resources, Inc.  which was uplisted to the New York stock Exchange on Nov. 9, 2018. Its quarterly loss totaled $301.2 million or $1.97 per share.

Roan was created out of the bankruptcy in 2017 of Houston-based Linn Energy Inc. Linn became a holding company solely for the existing 50 percent equity interest of Roan Resources which was a joint venture with Citizen Energy II LLC.

The company’s adjusted net income was $32.2 million or 21 cents a share. The third quarter net loss included the impact of income tax expense of $299.7 million attributable to the reorganization.

Despite the loss, the company saw a 30% increase in total production and a 35% jump in liquids production from the second quarter. roan also reported it drilled 27 gross operated wells with the addition of an eighth rig. Twenty-six of the wells were brought to first sales during the third quarter.

The company stated that 23 of the gross operated wells have at least 90 days of production and the average 90-day peak production rate was 1,560 Boe/d.

“Third quarter 2018 was a very successful quarter for Roan,” said Tony Maranto, Roan’s Chairman and Chief Executive Officer. “We completed the last steps to becoming a standalone public Company, finalizing the reorganization process from our two predecessor companies and increasing headcount to 170 full-time employees.”

Roan’s third quarter 2018 average daily production was approximately 46.5 thousand barrels of oil equivalent per day, up 30% over second quarter 2018 with liquids production up approximately 35% over second quarter 2018.

The Company drilled 27 gross (19.2 net) operated wells during the third quarter, bringing the total drilled wells for the year to 66 gross (49.0 net) operated wells. The Company also brought online 26 gross (19.0 net) operated wells during the quarter, bringing the year-to-date (YTD) total of wells turned online to 58 gross (44.5 net) operated wells.

Of the 58 gross wells turned online through third quarter of 2018, 29 wells targeted the Mayes formation and 29 wells targeted the Woodford formation.

“The average outperformance Roan operated wells are seeing at 90 days is a direct correlation to our emphasis on targeting,” said Mr. Maranto. “We expect this trend to continue as more wells fully operated by Roan reach 90 days of production and the distribution of our operated well results continues to narrow and improve from historical averages.”

Third quarter 2018 average realized prices were $68.86 per barrel of oil (Bo), $21.08 per barrel of natural gas liquids (NGLs) and $1.58 per Mcf of natural gas, resulting in a total equivalent unhedged price of $28.09 per Boe or a total equivalent hedged price of $24.83 per Boe.

Non-acquisition capital expenditures for third quarter 2018 totaled approximately $244.2 million, including $226.5 million for drilling and completions and $17.7 million for other capital expenditures. Capital expenditures for the quarter were higher due to increased activity with adding an eighth rig and ramp in completion activity, as well as costs attributable to wells drilled and completed by Roan’s predecessors.

As of September 30, 2018, Roan had $3.9 million of cash on the balance sheet and $394.6 million drawn on its revolving credit facility. Roan currently has no other outstanding debt. The Company’s third quarter annualized leverage ratio remained low at 1.3x. The Company also reported strong return metrics for the quarter with ROCE at 9.8% and ROE at 10.8%.

During the third quarter of 2018, Roan entered into additional oil and natural gas derivative contracts. A table of the Company’s derivative contracts as of November 9, 2018 is provided at the conclusion of this press release.

Fourth quarter 2018 operating expenses are projected to be lower than the third quarter results. LOE is expected to be between $2.60 and $2.90 per Boe and cash G&A (non-GAAP) is expected to be between $2.10 and $2.40 per Boe.

Fourth quarter capital expenditures are expected to be between $200 million and $225 million. Therefore, total capital expenditures for 2018 are now expected to be between $760 million and $785 million, which includes $110 million to $115 million in other capital expenditures. This is an increase to previously provided guidance due to costs attributable to wells drilled and completed from the predecessor companies, adding an eighth rig earlier than originally planned and higher completion costs as the Company tests different completion designs.