Roan Resources announces 2018, Q4 results
Roan Resources is “an entirely different company from where we started,” CEO Tony Maranto said this week in remarks related to its latest earnings release. The Oklahoma City-based company, which became publicly traded in late September, posted a net loss for 2018 but cut that fully in half with strong fourth-quarter earnings. It also substantially boosted its 2018 production from wells that are primarily within the MERGE region of Oklahoma's STACK and SCOOP plays over its 2017 results and aims for continued growth that will generate free cash flow by the end of the coming year without spending as much to get there. “2018 was a transformative year for Roan,” Maranto stated in an earnings release it issued late Monday evening. “We achieved several corporate and operational milestones throughout the year.” Building blocks Roan Resources was created in 2017 when Tulsa-based Citizen Energy II acquired part of Houston-based Linn Energy, which recently had emerged from bankruptcy. In September, after other Linn Energy assets spun off to become Riviera Resources Inc., Roan completed a reverse merger with Linn, taking over its over-the-counter stock and changing its stock symbol to “ROAN.” In November, it moved the stock on to the New York Stock Exchange. Along the way, the company substantially increased its borrowing base under its revolving credit facility from $425 million in late September to $750 million earlier this month. The company has about 150,000 net acres in Oklahoma's Merge, SCOOP and STACK plays. During a recent interview with The Oklahoman, Maranto said the company primarily is focused on developing wells it holds in the MERGE region that are between Lindsay, Mustang and Yukon, and has tweaked well plans that, combined with lower service costs, are saving it about $1 million per well.
Water deal announced
Another recent development for Roan is an agreement it made with Blue Mountain Midstream, a wholly owned subsidiary of Riviera Resources, to exclusively manage its produced water operations. Blue Mountain officials have said the agreement covers a 10-year period and includes a $59 million pipeline gathering, disposal, treatment and the redelivery system it will build and operate that will consist of a network of 100 miles of underground pipe covering parts of seven counties within the play, to start. They said the water treatment facility is being designed to handle up to 30,000 barrels per day, and that they expect the project to be operational later this year. Maranto said having a third party build and operate a water recycling facility with a permanent network of in-ground pipes will lower Roan's water handling costs significantly. “Just as importantly, it gets trucks off the road. We are working in a populated area, so we have been very cognizant that we need to do that,” he said, noting that early production from completed wells generates between 30 and 50 daily truckloads of produced water and oil. Additionally, it provides Roan with an affordable source of water during times when it is scarce. Maranto said Roan Resources strives to be a good neighbor in communities where it operates by keeping its footprint small, by drilling with all-electric rigs and by keeping roads clear and repaired. “Those are issues we try to stay on top of,” he said.
Results detailed
Roan Resources posted a net loss of nearly $141 million for 2018 butearned a net income of $148 million the final quarter of the year. The company's annual loss, which equated to 92 cents per share, was generated on total revenues of $518 million and a net income of $216 million before taxes of $357 million erased that surplus. Its fourth-quarter earnings, which equated to 97 cents per share, were generated on total revenues of $307 million and a net income before taxes of $206 million. Its adjusted earnings after interest, taxes, depreciation, amortization, capital exploration costs and derivative contracts was $87.8 million in fourth-quarter 2018 and $299 million the entire year. The company stated in its release that its financial audit is still underway. The company reported total production of about 43,700 barrels of oil equivalent daily in 2018. Of that, 27 percent was oil, 29 percent was natural gas liquids and 44 percent was natural gas. It stated its total production was up 170 percent compared to 2017, and that its oil production was up 200 percent, year-over-year. Looking ahead, Roan expects its 2019 capital expenditure budget will be between $520 million and $570 million, anticipates commodity prices of $55 oil and $2.75 natural gas and lease operating expenses of between $2.50 and $2.80 per equivalent barrel. “What we are in the process of doing is trying to create value for our investors,” Maranto said. “As a startup exploration and production company, you have to outspend to grow. “But to be an investible company that creates value for shareholders, you have got to be a free cash flow generating company.”