UNITED STATES | ||
SECURITIES AND EXCHANGE COMMISSION | ||
Washington, D.C. 20549 |
FORM 10-Q | ||
Roan Resources, Inc. | ||
(Exact Name of Registrant as Specified in its Charter) | ||
Delaware | 83-1984112 | |
(State or Other Jurisdiction of Incorporation) | (IRS Employer Identification No.) | |
14701 Hertz Quail Springs Pkwy Oklahoma City, OK | 73134 | |
(Address of Principal Executive Offices) | (Zip Code) | |
(405) 896-8050 | ||
(Registrant’s Telephone Number, including Area Code) | ||
Large Accelerated Filer ¨ | Accelerated Filer ¨ | |
Non-Accelerated Filer x | Smaller Reporting Company ¨ | |
Emerging Growth Company ¨ |
Securities Registered Pursuant to Section 12(b) of the Act: | ||
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Class A Common Stock, par value $0.001 per share | ROAN | New York Stock Exchange |
• | our business strategy; |
• | our reserves; |
• | our drilling plans, prospects, inventories, projects and programs; |
• | our ability to replace the reserves we produce through drilling and property acquisitions; |
• | our financial strategy, liquidity and capital required for our drilling program and timing related thereto; |
• | our realized oil, natural gas and NGL prices; |
• | the timing and amount of our future production of oil, natural gas and NGLs; |
• | our competition and government regulations; |
• | our ability to obtain permits and governmental approvals; |
• | our pending legal or environmental matters; |
• | our marketing of oil, natural gas and NGLs; |
• | our leasehold or business acquisitions; |
• | our costs of developing our properties; |
• | our hedging strategy and results; |
• | general economic conditions; |
• | credit markets; |
• | uncertainty regarding our future operating results including initial production values and liquid yields in our type curve areas; |
• | the costs, terms and availability of gathering, processing, fractionation and other midstream services; and |
• | our plans, objectives, expectations and intentions that are not historical. |
March 31, 2019 | December 31, 2018 | ||||||
(in thousands, except par value and share data) | |||||||
ASSETS | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 2,189 | $ | 6,883 | |||
Accounts receivable | |||||||
Oil, natural gas and natural gas liquid sales | 52,506 | 55,564 | |||||
Affiliates | 5,175 | 9,669 | |||||
Joint interest owners and other, net | 148,051 | 133,387 | |||||
Prepaid drilling advances | 23,132 | 28,977 | |||||
Derivative contracts | 14,104 | 82,180 | |||||
Other current assets | 10,179 | 6,655 | |||||
Total current assets | 255,336 | 323,315 | |||||
Noncurrent assets | |||||||
Oil and natural gas properties, successful efforts method | 2,801,145 | 2,628,333 | |||||
Accumulated depreciation, depletion, amortization and impairment | (282,541 | ) | (230,836 | ) | |||
Oil and natural gas properties, net | 2,518,604 | 2,397,497 | |||||
Derivative contracts | 4,529 | 20,638 | |||||
Other | 12,967 | 7,659 | |||||
Total assets | $ | 2,791,436 | $ | 2,749,109 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities | |||||||
Accounts payable | $ | 121,110 | $ | 49,746 | |||
Accrued liabilities | 131,403 | 176,494 | |||||
Accounts payable and accrued liabilities – Affiliates | — | 8,577 | |||||
Revenue payable | 95,104 | 97,963 | |||||
Drilling advances | 36,149 | 31,058 | |||||
Derivative contracts | 5,583 | 845 | |||||
Other current liabilities | 2,552 | 790 | |||||
Total current liabilities | 391,901 | 365,473 | |||||
Noncurrent liabilities | |||||||
Long-term debt | 602,639 | 514,639 | |||||
Deferred tax liabilities, net | 333,966 | 356,862 | |||||
Asset retirement obligations | 16,967 | 16,058 | |||||
Derivative contracts | 241 | 141 | |||||
Other | 5,679 | 902 | |||||
Total liabilities | 1,351,393 | 1,254,075 | |||||
Commitments and contingencies (Note 14) | |||||||
Equity | |||||||
Class A common stock, $0.001 par value; 800,000,000 shares authorized; 152,539,532 shares issued and outstanding at March 31, 2019 and December 31, 2018 | 153 | 153 | |||||
Preferred stock, $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding at March 31, 2019 or December 31, 2018 | — | — | |||||
Additional paid-in capital | 1,649,466 | 1,646,401 | |||||
Accumulated deficit | (209,576 | ) | (151,520 | ) | |||
Total equity | 1,440,043 | 1,495,034 | |||||
Total liabilities and equity | $ | 2,791,436 | $ | 2,749,109 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands, except per share amounts) | ||||||||
Revenues | ||||||||
Oil sales | $ | 60,571 | $ | 63,692 | ||||
Natural gas sales | 11,189 | 10,332 | ||||||
Natural gas sales – Affiliates | 10,592 | 6,558 | ||||||
Natural gas liquid sales | 8,338 | 11,939 | ||||||
Natural gas liquid sales – Affiliates | 7,849 | 8,449 | ||||||
Loss on derivative contracts | (83,642 | ) | (9,614 | ) | ||||
Total revenues | 14,897 | 91,356 | ||||||
Operating Expenses | ||||||||
Production expenses | 14,846 | 8,355 | ||||||
Production taxes | 5,039 | 2,386 | ||||||
Exploration expenses | 12,488 | 7,850 | ||||||
Depreciation, depletion, amortization and accretion | 41,572 | 21,865 | ||||||
General and administrative | 15,825 | 14,020 | ||||||
Gain on sale of other assets | (664 | ) | — | |||||
Total operating expenses | 89,106 | 54,476 | ||||||
Total operating (loss) income | (74,209 | ) | 36,880 | |||||
Other income (expense) | ||||||||
Interest expense, net | (6,744) | (1,799 | ) | |||||
Net (loss) income before income taxes | (80,953 | ) | 35,081 | |||||
Income tax benefit | (22,897 | ) | — | |||||
Net (loss) income | $ | (58,056 | ) | $ | 35,081 | |||
Earnings (loss) per share | ||||||||
Basic | $ | (0.38 | ) | $ | 0.23 | |||
Diluted | $ | (0.38 | ) | $ | 0.23 | |||
Weighted average number of shares outstanding | ||||||||
Basic | 152,540 | 151,294 | ||||||
Diluted | 152,540 | 151,294 |
Stockholders’ Equity | |||||||||||||||||
Common Stock (Shares) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Members’ Equity | Total Equity | ||||||||||||
(in thousands) | |||||||||||||||||
Balance at December 31, 2017 | — | $ | — | $ | — | $ | — | $ | 1,584,769 | $ | 1,584,769 | ||||||
Acquisition of oil and natural gas properties in exchange for equity units | — | — | — | — | 39,906 | 39,906 | |||||||||||
Equity-based compensation | — | — | — | — | 2,292 | 2,292 | |||||||||||
Net income | — | — | — | — | 35,081 | 35,081 | |||||||||||
Balance at March 31, 2018 | — | $ | — | $ | — | $ | — | $ | 1,662,048 | $ | 1,662,048 | ||||||
Balance at December 31, 2018 | 152,540 | $ | 153 | $ | 1,646,401 | $ | (151,520 | ) | $ | — | $ | 1,495,034 | |||||
Equity-based compensation | — | — | 3,065 | — | — | 3,065 | |||||||||||
Net loss | — | — | — | (58,056 | ) | — | (58,056 | ) | |||||||||
Balance at March 31, 2019 | 152,540 | $ | 153 | $ | 1,649,466 | $ | (209,576 | ) | $ | — | $ | 1,440,043 | |||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Cash flows from operating activities | |||||||
Net (loss) income | $ | (58,056 | ) | $ | 35,081 | ||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | |||||||
Depreciation, depletion, amortization and accretion | 41,572 | 21,865 | |||||
Unproved leasehold amortization and impairment | 11,331 | 7,350 | |||||
Gain on sale of other assets | (664 | ) | — | ||||
Amortization of deferred financing costs | 537 | 145 | |||||
Loss on derivative contracts | 83,642 | 9,614 | |||||
Net cash received (paid) upon settlement of derivative contracts | 2,549 | (4,138 | ) | ||||
Equity-based compensation | 3,065 | 2,292 | |||||
Deferred income taxes | (22,897 | ) | — | ||||
Other | 1,514 | — | |||||
Changes in operating assets and liabilities increasing (decreasing) cash: | |||||||
Accounts receivable and other assets | (14,770 | ) | (56,369 | ) | |||
Accounts payable and other liabilities | 15,792 | (24,614 | ) | ||||
Net cash provided by (used in) operating activities | 63,615 | (8,774 | ) | ||||
Cash flows from investing activities | |||||||
Acquisition of oil and natural gas properties | — | (22,935 | ) | ||||
Capital expenditures for oil and natural gas properties | (159,381 | ) | (87,549 | ) | |||
Acquisition of other property and equipment | (83 | ) | (770 | ) | |||
Proceeds from sale of other assets | 1,264 | — | |||||
Net cash used in investing activities | (158,200 | ) | (111,254 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from borrowings | 88,000 | 121,300 | |||||
Other | 1,891 | — | |||||
Net cash provided by financing activities | 89,891 | 121,300 | |||||
Net (decrease) increase in cash and cash equivalents | (4,694 | ) | 1,272 | ||||
Cash and cash equivalents, beginning of period | 6,883 | 1,471 | |||||
Cash and cash equivalents, end of period | $ | 2,189 | $ | 2,743 | |||
Supplemental disclosure of cash flow information | |||||||
Cash paid for interest, net of capitalized interest | $ | 5,718 | $ | 1,569 | |||
Supplemental disclosure of non-cash investing and financing activities | |||||||
Change in accrued capital expenditures | $ | 4,489 | $ | (2,951 | ) | ||
Acquisition of oil and natural gas properties for equity | $ | — | $ | 39,906 | |||
Right of use assets obtained in exchange for operating lease liabilities | $ | 7,139 | $ | — |
As of March 31, 2019 | |||||||||
Under ASC 842 | Under ASC 840 | Increase/(decrease) | |||||||
(in thousands) | |||||||||
Other noncurrent assets | $ | 6,068 | $ | — | $ | 6,068 | |||
Other current liabilities | $ | 1,813 | $ | — | $ | 1,813 | |||
Other noncurrent liabilities | $ | 5,326 | $ | 1,071 | $ | 4,255 |
March 31, 2019 | December 31, 2018 | ||||||
(in thousands) | |||||||
Oil and natural gas properties | |||||||
Proved | $ | 1,730,526 | $ | 1,538,379 | |||
Unproved | 1,070,619 | 1,089,954 | |||||
Less: accumulated depreciation, depletion, amortization and impairment | (282,541 | ) | (230,836 | ) | |||
Oil and natural gas properties, net | $ | 2,518,604 | $ | 2,397,497 |
Asset retirement obligation, December 31, 2018 | $ | 16,848 | |
Liabilities incurred or acquired | 667 | ||
Revisions in estimated cash flows | — | ||
Liabilities settled | (87 | ) | |
Accretion expense | 278 | ||
Asset retirement obligation, March 31, 2019 | 17,706 | ||
Less: current portion of obligations (1) | 739 | ||
Asset retirement obligation – long term | $ | 16,967 |
Utilization Level | Utilization | LIBOR Margin | ABR Margin | Commitment Fee |
Level I | <25% | 2.00% | 1.00% | 0.375% |
Level II | >25% but <50% | 2.25% | 1.25% | 0.375% |
Level III | >50% but <75% | 2.50% | 1.50% | 0.500% |
Level IV | >75% but <90% | 2.75% | 1.75% | 0.500% |
Level V | >90% | 3.00% | 2.00% | 0.500% |
2019 | 2020 | Total | |||||||||
Oil fixed price swaps | |||||||||||
Volume (Bbl) | 3,874,890 | 3,063,500 | 6,938,390 | ||||||||
Weighted-average price | $ | 60.05 | $ | 60.74 | $ | 60.36 | |||||
Natural gas fixed price swaps | |||||||||||
Volume (MMBtu) | 30,442,000 | 16,005,000 | 46,447,000 | ||||||||
Weighted-average price | $ | 2.91 | $ | 2.64 | $ | 2.82 | |||||
Natural gas basis swaps | |||||||||||
Volume (MMBtu) | 22,000,000 | 7,320,000 | 29,320,000 | ||||||||
Weighted-average price | $ | 0.60 | $ | 0.53 | $ | 0.58 | |||||
Natural gas liquids fixed price swaps | |||||||||||
Volume (Bbl) | 825,000 | — | 825,000 | ||||||||
Weighted-average price | $ | 32.25 | $ | — | $ | 32.25 |
Three Months Ended March 31, 2019 | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Loss on derivative contracts | $ | (83,642 | ) | $ | (9,614 | ) | |
Net cash received (paid) upon settlement of derivative contracts (1) | $ | 5,382 | $ | (4,138 | ) |
March 31, 2019 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Gross Fair Value | Netting | Carrying Value | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current commodity derivatives | $ | — | $ | 19,834 | $ | — | $ | 19,834 | $ | (5,730 | ) | $ | 14,104 | ||||||||||
Noncurrent commodity derivatives | — | 5,805 | — | 5,805 | (1,276 | ) | 4,529 | ||||||||||||||||
Total assets | $ | — | $ | 25,639 | $ | — | $ | 25,639 | $ | (7,006 | ) | $ | 18,633 | ||||||||||
Liabilities | |||||||||||||||||||||||
Current commodity derivatives | $ | — | $ | (11,313 | ) | $ | — | $ | (11,313 | ) | $ | 5,730 | $ | (5,583 | ) | ||||||||
Noncurrent commodity derivatives | — | (1,517 | ) | — | (1,517 | ) | 1,276 | (241 | ) | ||||||||||||||
Total liabilities | $ | — | $ | (12,830 | ) | $ | — | $ | (12,830 | ) | $ | 7,006 | $ | (5,824 | ) | ||||||||
December 31, 2018 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Gross Fair Value | Netting | Carrying Value | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current commodity derivatives | $ | — | $ | 85,728 | $ | — | $ | 85,728 | $ | (3,548 | ) | $ | 82,180 | ||||||||||
Noncurrent commodity derivatives | — | 21,565 | — | 21,565 | (927 | ) | 20,638 | ||||||||||||||||
Total assets | $ | — | $ | 107,293 | $ | — | $ | 107,293 | $ | (4,475 | ) | $ | 102,818 | ||||||||||
Liabilities | |||||||||||||||||||||||
Current commodity derivatives | $ | — | $ | (4,393 | ) | $ | — | $ | (4,393 | ) | $ | 3,548 | $ | (845 | ) | ||||||||
Noncurrent commodity derivatives | — | (1,068 | ) | — | (1,068 | ) | 927 | (141 | ) | ||||||||||||||
Total liabilities | $ | — | $ | (5,461 | ) | $ | — | $ | (5,461 | ) | $ | 4,475 | $ | (986 | ) |
Number of PSUs | Weighted Average Fair Value | Total Fair Value ($ in thousands) | ||||||||
Outstanding at December 31, 2018 | 1,158,750 | $ | 30.95 | $ | 35,864 | |||||
Granted | — | — | — | |||||||
Vested | — | — | — | |||||||
Forfeited | — | — | — | |||||||
Outstanding at March 31, 2019 | 1,158,750 | $ | 30.95 | $ | 35,864 |
Number of RSUs | Weighted Average Fair Value | Total Fair Value ($ in thousands) | ||||||||
Outstanding at December 31, 2018 | 11,800 | $ | 16.95 | $ | 200 | |||||
Granted | — | — | — | |||||||
Vested | — | — | — | |||||||
Forfeited | — | — | — | |||||||
Outstanding at March 31, 2019 | 11,800 | $ | 16.95 | $ | 200 |
Operating Leases | |||
Operating lease right of use assets | $ | 6,068 | |
Current operating lease liabilities | $ | 1,813 | |
Noncurrent operating lease liabilities | 5,326 | ||
Total operating lease liabilities | $ | 7,139 |
2019 | $ | 1,384 | |
2020 | 2,046 | ||
2021 | 2,136 | ||
2022 | 2,229 | ||
2023 | 456 | ||
Thereafter | 171 | ||
Total lease payments | 8,422 | ||
Less imputed interest | (1,283 | ) | |
Total | $ | 7,139 |
• | actual and projected reserve and production levels; |
• | realized prices on the sale of oil, natural gas and NGLs, including the effect of our commodity derivative contracts; |
• | lease operating expenses; and |
• | capital expenditures on our oil and natural gas properties. |
• | Net loss was $58.1 million for the three months ended March 31, 2019, as compared to net income of $35.1 million for the three months ended March 31, 2018. The net loss was primarily due to: |
• | $2.4 million decrease in total oil, natural gas and NGL sales, primarily as a result of a decrease in realized prices during the three months ended March 31, 2019 partially offset by an increase in production volumes. |
• | $74.0 million increase in loss on derivative contracts during the three months ended March 31, 2019 as a result of increases in oil prices during this period; |
• | $6.5 million increase in production expenses, primarily related to an increase in production volumes for the three months ended March 31, 2019; |
• | $4.6 million increase in exploration expenses, primarily related to increased unproved leasehold amortization during the three months ended March 31, 2019; |
• | $19.7 million increase in depreciation, depletion, amortization and accretion, primarily due to an increase in production volumes and a higher depletion rate due to increases in capital expenditures; |
• | $22.9 million income tax benefit during the three months ended March 31, 2019. |
• | Average daily sales volumes were 48.9 MBoe for the three months ended March 31, 2019, an increase of 30% compared to 37.7 MBoe during the same period in 2018. |
• | Drilled or participated in 24 gross (13 net) wells with first production during the first three months of 2019. |
Three Months Ended March 31, | |||||
2019 | 2018 | ||||
Revenues | |||||
Oil sales | 61 | % | 63 | % | |
Natural gas sales | 22 | % | 17 | % | |
Natural gas liquid sales | 17 | % | 20 | % |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Average NYMEX prices | |||||||
Oil (Bbl) | $ | 54.85 | $ | 62.86 | |||
Natural gas (MMcf) | $ | 3.02 | $ | 3.19 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Production Data | |||||||
Oil (MBbls) | 1,139 | 1,038 | |||||
Natural gas (MMcf) | 11,620 | 8,912 | |||||
Natural gas liquids (MBbls) | 1,329 | 874 | |||||
Total volumes (MBoe) | 4,405 | 3,397 | |||||
Average daily total volumes (MBoe/d) | 48.9 | 37.7 | |||||
Average Prices - as reported | |||||||
Oil (per Bbl) | $ | 53.18 | $ | 61.36 | |||
Natural gas (per Mcf) | $ | 1.87 | $ | 1.90 | |||
Natural gas liquids (per Bbl) | $ | 12.18 | $ | 23.33 | |||
Total (per Boe) | $ | 22.37 | $ | 29.72 | |||
Average Prices - including impact of derivative contract settlements (1) | |||||||
Oil (per Bbl) | $ | 59.46 | $ | 56.78 | |||
Natural gas (per Mcf) | $ | 1.53 | $ | 1.92 | |||
Natural gas liquids (per Bbl) | $ | 13.86 | $ | 23.33 | |||
Total (per Boe) | $ | 23.59 | $ | 28.39 | |||
Average Prices - excluding gathering, transportation and processing costs (2) | |||||||
Oil (per Bbl) | $ | 53.27 | $ | 61.36 | |||
Natural gas (per Mcf) | $ | 2.50 | $ | 2.39 | |||
Natural gas liquids (per Bbl) | $ | 16.31 | $ | 28.66 | |||
Total (per Boe) | $ | 25.30 | $ | 32.40 |
(1) | Excludes settlement of derivative contracts prior to their contractual maturity for the three months ended March 31, 2018. |
(2) | Excludes the effects of netting gathering, transportation and processing costs. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Revenues | (in thousands) | ||||||
Oil sales | $ | 60,571 | $ | 63,692 | |||
Natural gas sales | 21,781 | 16,890 | |||||
Natural gas liquid sales | 16,187 | 20,388 | |||||
Loss on derivative contracts | (83,642 | ) | (9,614 | ) | |||
Total revenues | $ | 14,897 | $ | 91,356 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(in thousands, except costs per Boe) | |||||||
Operating Expenses | |||||||
Production expenses | $ | 14,846 | $ | 8,355 | |||
Production taxes | 5,039 | 2,386 | |||||
Exploration expenses | 12,488 | 7,850 | |||||
Depreciation, depletion, amortization and accretion | 41,572 | 21,865 | |||||
General and administrative (1) | 15,825 | 14,020 | |||||
Gain on sale of other assets | (664 | ) | — | ||||
Total | $ | 89,106 | $ | 54,476 | |||
Average Costs per Boe | |||||||
Production expenses | $ | 3.37 | $ | 2.46 | |||
Production taxes | 1.14 | 0.70 | |||||
Exploration expenses | 2.84 | 2.31 | |||||
Depreciation, depletion, amortization and accretion | 9.44 | 6.44 | |||||
General and administrative (1) | 3.59 | 4.13 | |||||
Gain on sale of other assets | (0.15 | ) | — | ||||
Total | $ | 20.23 | $ | 16.04 |
(1) | General and administrative expenses for the three months ended March 31, 2019 and 2018 include $3.1 million, or $0.70 per Boe, and $2.3 million, or $0.67 per Boe, of equity-based compensation expense, respectively. General and administrative expenses for the three months ended March 31, 2019 includes $1.5 million, or $0.34 per Boe, of bad debt expense. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(in thousands) | |||||||
Net cash provided by (used in) operating activities | $ | 63,615 | $ | (8,774 | ) | ||
Net cash used in investing activities | (158,200 | ) | (111,254 | ) | |||
Net cash provided by financing activities | 89,891 | 121,300 | |||||
Net (decrease) increase in cash and cash equivalents | $ | (4,694 | ) | $ | 1,272 |
2019 | 2020 | Total | |||||||||
Oil fixed prices swaps | |||||||||||
Volume (Bbl) | 3,874,890 | 3,063,500 | 6,938,390 | ||||||||
Weighted-average price | $ | 60.05 | $ | 60.74 | $ | 60.36 | |||||
Natural gas fixed price swaps | |||||||||||
Volume (MMBtu) | 30,442,000 | 16,005,000 | 46,447,000 | ||||||||
Weighted-average price | $ | 2.91 | $ | 2.64 | $ | 2.82 | |||||
Natural gas basis swaps | |||||||||||
Volume (MMBtu) | 22,000,000 | 7,320,000 | 29,320,000 | ||||||||
Weighted-average price | $ | 0.60 | $ | 0.53 | $ | 0.58 | |||||
Natural gas liquids fixed prices swaps | |||||||||||
Volume (Bbl) | 825,000 | — | 825,000 | ||||||||
Weighted-average price | $ | 32.25 | $ | — | $ | 32.25 |
Exhibit No. | Exhibit | |
Linn Merger Agreement, dated September 24, 2018, by and among Linn Energy, Inc., Roan Resources, Inc. and Linn Merger Sub #2, LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed on September 24, 2018) | ||
Roan Merger Agreement, dated September 24, 2018, by and among Roan Holdings, LLC, Roan Holdings Holdco, LLC, Roan Resource, Inc. and Linn Merger Sub #3, LLC (incorporated by reference to Exhibit 2.2 to Form 8-K filed on September 24, 2018) | ||
Master Reorganization Agreement, dated September 17, 2018, by and among Linn Energy, Inc., Roan Holdings, LLC, and Roan Resources LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed by Linn Energy, Inc. on September 21, 2018) | ||
Separation and Distribution Agreement, dated August 7, 2018, by and between Linn Energy, Inc. and Riviera Resources, Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed by Linn Energy, Inc. on August 10, 2018) | ||
Agreement and Plan of Merger, dated July 25, 2018, by and among Linn Energy Inc., New LINN Inc. and Linn Merger Sub #1, LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed by Linn Energy, Inc. on July 26, 2018) | ||
Second Amended and Restated Certificate of Incorporation of Roan Resources, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed on September 27, 2018) | ||
Second Amended and Restated Bylaws of Roan Resources, Inc. (incorporated by reference to Exhibit 3.2 to Form 8-K filed on September 27, 2018) | ||
Registration Rights Agreement, dated September 24, 2018, by and among Roan Resources, Inc. and each of the other parties listed on the signature page thereto (incorporated by reference to Exhibit 4.1 to Form 8-K filed on September 24, 2018) | ||
Stockholders Agreement, dated September 24, 2018, by and among Roan Resources, Inc., the Existing LINN Owners (as defined therein), Roan Holdings, LLC and any other persons signatory thereto from time to time (incorporated by reference to Exhibit 4.2 to Form 8-K filed on September 24, 2018) | ||
Amendment No. 4 to Credit Agreement, dated March 13, 2019 (incorporated by reference to Exhibit 10.1 to Form 8-K filed on March 13, 2019) | ||
31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
*Filed herewith | ||
** Furnished herewith | ||
† Compensatory plan or arrangement |
Date: | May 15, 2019 | /s/ Joseph A. Mills |
Joseph A. Mills | ||
Executive Chairman | ||
(Principal Executive Officer) | ||
Date: | May 15, 2019 | /s/ David M. Edwards |
David M. Edwards | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
1. | I have reviewed this Quarterly Report on Form 10-Q of Roan Resources, Inc. (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
1. | I have reviewed this Quarterly Report on Form 10-Q of Roan Resources, Inc. (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
(1) | the Report fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
(1) | the Report fully complies with the requirements of Section 13 (a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2019 |
May 10, 2019 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | ROAN RESOURCES, INC. | |
Entity Central Index Key | 0001326428 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 152,539,532 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false |
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (usd per share) | $ 0.001 | $ 0.001 |
Common shares authorized (shares) | 800,000,000 | 800,000,000 |
Common shares issued (shares) | 152,539,532 | 152,539,532 |
Common shares outstanding (shares) | 152,539,532 | 152,539,532 |
Preferred stock, par value (usd per share) | $ 0.001 | $ 0.001 |
Preferred shares authorized (shares) | 50,000,000 | 50,000,000 |
Preferred shares issued (shares) | 0 | 0 |
Preferred shares outstanding (shares) | 0 | 0 |
Business and Organization |
3 Months Ended |
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Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and Organization | Note 1 – Business and Organization Roan Resources, Inc. (“Roan Inc.”) was formed in September 2018 to facilitate a reorganization and to become the holding company for Roan Resources LLC (“Roan LLC”). In September 2018, a series of transactions were executed with Roan LLC’s members which resulted in Roan LLC becoming a wholly owned subsidiary of Roan Inc. These transactions are hereafter referred to as the “Reorganization” and Roan Inc. with its subsidiaries are collectively referred to as the “Company.” See Note 10 – Equity for further discussion of the Reorganization transaction. The accompanying historical financial statements for the three months ended March 31, 2018 are the financial statements of Roan LLC, our accounting predecessor. Following the Reorganization, the historical financial statements are the results of Roan Inc. Roan LLC was initially formed by Citizen Energy II, LLC (“Citizen”) in May 2017. On August 31, 2017, a contribution agreement (the “Contribution Agreement”) by and among Roan LLC, Citizen, Linn Energy Holdings, LLC (“LEH”) and Linn Operating, LLC (“LOI”, and together with LEH, “Linn”) was executed, pursuant to which, among other things, Citizen and Linn agreed to contribute oil and natural gas properties within an area-of-mutual-interest to Roan LLC (collectively the “Contribution”). In exchange for their contributions, Citizen and Linn each received a 50% equity interest in Roan LLC. In conjunction with the Contribution Agreement, Roan LLC entered into management services agreements with both Citizen and Linn (“MSAs”). See Note 12 –Transactions with Affiliates for additional discussion of the MSAs and transactions with Citizen and Linn. The Company was formed to engage in the acquisition, exploration, development, production, and sale of oil and natural gas reserves. The Company’s oil and natural gas properties are located in Central Oklahoma. The Company’s corporate headquarters is located in Oklahoma City, Oklahoma. |
Summary of Significant Accounting Policies |
3 Months Ended |
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Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies For a description of the Company’s significant accounting policies, refer to Note 2 to the Company’s 2018 audited financial statements included in the Annual Report on Form 10-K. The accompanying condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain amounts in the prior period financial statements have been reclassified to conform to the 2019 presentation. These reclassifications had no impact on net income (loss), total stockholders’ equity or total cash flows. Principles of Consolidation The condensed consolidated financial statements of the Company include the accounts of Roan Inc. and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. Interim Financial Statements The accompanying condensed consolidated financial statements as of December 31, 2018 were derived from the annual financial statements included in the Annual Report on Form 10-K. The unaudited interim condensed consolidated financial statements for the three months ended March 31, 2019 and 2018 were prepared by the Company in accordance with the accounting policies stated in the audited financial statements. In the opinion of management, the Company’s unaudited condensed consolidated financial statements reflect all known adjustments necessary to fairly state the financial position of the Company and its results of operations and cash flows for such periods. All such adjustments are of a normal, recurring nature. Certain information and disclosures normally included in financial statements prepared in conformity with GAAP have been consolidated or omitted, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual financial statements and notes thereto. Use of Estimates The preparation of financial statements and related footnotes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. A significant item that requires management’s estimates and assumptions is the estimate of proved oil, natural gas and NGL reserves which are used in the calculation of depletion of the Company’s oil and natural gas properties and impairment, if any, of proved oil and natural gas properties. Changes in estimated quantities of its reserves could impact the Company’s reported financial results as well as disclosures regarding the quantities and value of proved oil and natural gas reserves. Although management believes these estimates are reasonable, actual results could differ from these estimates. Recent Accounting Standards Issued In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”). This update applies to any entity that enters into a lease, with some specified scope exemptions. Under this update, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. While there were no major changes to the lessor accounting, changes were made to align key aspects with the revenue recognition guidance. The Company adopted the new standard using the simplified transition method described in ASU 2018-11 Leases (Topic 842): Targeted Improvements as of January 1, 2019 and did not retrospectively apply the new standard to periods before adoption. Accordingly, comparative information has not been adjusted and continues to be reported under the previous leasing standard. See Note 3 - Lease Accounting for additional information on the adoption of ASC 842. |
Lease Accounting |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Accounting | Note 3 - Lease Accounting The Company adopted ASC 842 on January 1, 2019 using the simplified transition method described in ASU 2018-11 Leases (Topic 842): Targeted Improvements. Accordingly, comparative information was not adjusted and will continue to be reported under the previous lease standard. The adoption did not require an adjustment to opening retained earnings for the cumulative effect adjustment. The Company further utilized the package of practical expedients within ASC 842 that allows an entity to not reassess the following prior to the effective date (i) whether any expired or existing contracts were or contained leases, (ii) the lease classification for any expired or existing leases or (iii) initial direct costs for any existing leases. The Company also elected the practical expedient under ASU 2018-01 Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 that allows it to not evaluate existing or expired land easements not previously accounted for as leases prior to the effective date. Finally, the Company has elected the short-term lease recognition exemption for all leases that qualify and the practical expedient to not separate lease and non-lease components for the majority of classes of underlying assets. The Company enters into lease agreements to support its operations, such as office space, drilling rigs and field equipment. ASC 842 does not impact the accounting or financial presentation of the Company’s mineral leases and also does not apply to leases used in the exploration or use of oil and natural gas, including the rights to explore for those natural resources and rights to use the land in which those natural resources are contained. To facilitate compliance with ASC 842, the Company evaluated its existing lease arrangements and enhanced its systems, processes and internal controls to identify, track and record applicable leases. The implementation and adoption of this standard resulted in the Company recognizing right-of-use assets and lease liabilities for certain of its operating leases on the accompanying condensed consolidated balance sheet as of March 31, 2019. The Company has no finance leases. The following table shows the impact of the adoption of ASC 842 on the Company’s current period balance sheet as compared to the previous lease accounting standard, ASC Topic 840, Leases (“ASC 840”):
Lease Accounting Policies The Company determines if an arrangement is a lease at the inception of the arrangement by (i) identifying any assets within the contract (ii) determining whether the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use and (iii) if the Company has the right to direct how and for what purpose the identified asset is used throughout the period of use. To the extent that it is determined that an arrangement represents a lease, the lease is classified as an operating lease or a finance lease. The Company capitalizes both lease classifications on its consolidated balance sheets through a right-of-use (“ROU”) asset and a corresponding lease liability. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in other noncurrent assets, other current liabilities, and other noncurrent liabilities in the consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at the commencement date of an arrangement based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made to the lessor prior to lease commencement, less any lease incentives, and initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Certain of the Company’s lease agreements include lease and non-lease components. For all asset classes with multiple component types, the Company has utilized the practical expedient that exempts it from separating lease components from non-lease components. Accordingly, the Company accounts for the lease and non-lease components in an arrangement as a single lease component. In addition, for all asset classes, the Company has made an accounting policy election not to apply the lease recognition requirements to its short-term leases (that is, a lease that, at commencement, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise). Accordingly, the Company recognizes lease payments related to its short-term leases in profit or loss on a straight-line basis over the lease term. To the extent that there are variable lease payments, the Company recognizes those payments in profit or loss in the period in which the obligation for those payments is incurred. Refer to “Nature of Leases” below for further information regarding those asset classes that include material short-term leases. Nature of Leases The Company leases certain office space, drilling rigs and field equipment under cancelable and non-cancelable leases to support our operations. Office Buildings. The Company leases its corporate office space in Oklahoma City, Oklahoma and additional office space for its field location in Oklahoma. In general, the Company’s office lease agreements contain provisions to extend the lease and contain protective provisions that allow for early termination. Beginning in March 2019, the Company began paying its portion of the building’s operating expenses, as defined in the corporate office lease agreement. These expenses are considered variable leases payments, which were not included in the measurement of the lease liability. The Company’s office building leases are long term leases reflected under ASC 842 on the accompanying condensed consolidated balance sheet as of March 31, 2019. Drilling Rigs. The Company enters into daywork contracts for drilling rigs with third party service contractors to support the development and exploitation of undeveloped reserves. All of the Company’s current drilling contracts have a term of one year or less. Field Equipment. The Company rents various field equipment, including compressors, from third parties in order to facilitate its operations. Compressor arrangements are typically structured with a non-cancelable primary term of twelve months and continue thereafter on a month-to-month basis subject to termination by either party with thirty days’ notice. The Company has concluded that its compressor rental agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreement subsequent to the primary term. Other field equipment arrangements are typically structured on a month-to-month basis subject to termination by either party. To the extent that field equipment rental arrangements have a primary term of twelve months or less, the Company has elected to apply the practical expedient for short-term leases. For those short-term arrangements, the Company does not apply the lease recognition requirements, and recognizes lease payments related to these arrangements in profit or loss on a straight-line basis over the lease term. Refer to the “Lease Accounting Policies” section above for discussion of practical expedients applied. Discount Rate. The Company’s leases typically do not provide an implicit rate, and thus, it is required that the Company use its incremental borrowing rate in determining the present value of lease payments based on the information available at commencement date. The Company’s incremental borrowing rate reflects the rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company uses the implicit rate in the limited circumstances in which that rate is readily determinable. |
Revenue from Contracts with Customers |
3 Months Ended |
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Mar. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | Note 4 – Revenue from Contracts with Customers Revenues from the sale of oil, natural gas and NGLs are recognized when control of the product has been transferred to the customer, all performance obligations have been satisfied and collectability is reasonably assured. We recognize revenues from the sale of oil, natural gas and NGLs based on our share of volumes sold. Performance Obligations The Company satisfies the performance obligations under its oil and natural gas sales contracts through delivery of its production and transfer of control to a customer. Upon delivery of production, the Company has the right to receive consideration from its customers in amounts that correspond with the value of the production transferred. The Company typically receives payment for oil, natural gas and NGL sales within 30 days of the month of delivery for operated properties and within 90 days of the month of delivery for non-operated properties. The Company’s oil sales contracts are short-term in nature with a contract term of one year or less. For those contracts, the Company utilized the practical expedient in Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which provides an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. For the Company’s natural gas and NGL sales contracts that have a contract term greater than one year, the Company utilized the practical expedient in ASC 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. Contract Balances The Company recognizes sales of oil, natural gas, and NGLs at a point in time when it satisfies a performance obligation and at that point the Company has an unconditional right to receive payment. Accordingly, these contracts do not give rise to contract assets or contract liabilities under ASC 606. The Company had accounts receivable related to revenue from contracts with customers as of March 31, 2019 and December 31, 2018 of approximately $57.7 million and $65.2 million, respectively, which represent this unconditional right to receive payment. Prior Period Performance Obligations To record revenues for oil, natural gas and NGLs, the Company estimates the amount of production delivered at the end of each month and the prices expected to be received for those sales. Differences between estimated revenues and actual amounts received for all prior months are recorded in the month payment is received from the customer. For the three months ended March 31, 2019 and 2018, revenue recognized related to performance obligations satisfied in prior reporting periods was not material. |
Oil and Natural Gas Properties |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oil and Natural Gas Properties | Note 5 – Oil and Natural Gas Properties The Company’s oil and natural gas properties are in the continental United States. The oil and natural gas properties include the following:
For the three months ended March 31, 2019 and 2018, the Company recorded amortization expense on its unproved oil and natural gas properties of $11.3 million and $7.4 million, respectively, which is reflected in exploration expense on the accompanying condensed consolidated statements of operations. Unproved leasehold amortization reflects consideration of the Company’s drilling plans and the lease terms of its existing unproved properties. No impairment of proved oil and natural gas properties was recorded for the three months ended March 31, 2019 or 2018. |
Asset Retirement Obligations |
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Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligations | Note 6 – Asset Retirement Obligations The following is a reconciliation of the changes in the Company’s asset retirement obligation (“ARO”) for the three months ended March 31, 2019 (in thousands):
(1) The current portion of the ARO liability is included in other current liabilities on the condensed consolidated balance sheet. |
Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Note 7 – Long-Term Debt In September 2017, the Company entered into a $750.0 million credit agreement with an initial borrowing base of $200.0 million and maturity on September 5, 2022 (as amended, the “Credit Facility”). Redetermination of the borrowing base of the Credit Facility occurs semiannually on or about October 1 and April 1. The redeterminations in September 2018 and March 2019 resulted in an increase to the borrowing base to $675.0 million and $750.0 million, respectively. As of March 31, 2019, the Company had $602.6 million of outstanding borrowings and no letters of credit outstanding under the Credit Facility. The Credit Facility is secured by substantially all of the assets of the Company. The Company amended the Credit Facility in March 2019 to increase the borrowing base as noted above as well as to allow for (i) secured permitted additional debt of up to $250 million before any reduction in the borrowing base would occur and (ii) unsecured permitted additional debt of up to $400 million before any reduction in the borrowing base would occur. Amounts borrowed under the Credit Facility bear interest at London Interbank Offered Rate (“LIBOR”) or the alternate base rate (“ABR”) at the Company’s election. The rate used for ABR loans is based on the higher of the prime rate, the federal funds effective rate plus 0.50% or the one-month LIBOR rate plus 1%. Either rate is adjusted upward by an applicable margin, based on the utilization percentage of the Credit Facility. Additionally, the Credit Facility provides for a commitment fee, which is payable at the end of each calendar quarter. The pricing grid below shows the applicable margin for LIBOR rate or ABR loans as well as the commitment fee depending on the Utilization Level (as defined in the credit agreement):
The Credit Facility contains representations, warranties, covenants, conditions and defaults customary for transactions of this type, including but not limited to: (i) limitations on liens and incurrence of debt covenants; (ii) limitations on the sale of property, mergers, consolidations and other similar transactions covenants; (iii) limitations on investments, loans and advances covenants; and (iv) limitations on dividends, distributions, redemptions and restricted payments covenants. Additionally, the Company is prohibited from hedging in excess of (a) 80% of reasonably anticipated projected production for the first thirty (30) month rolling period (based upon the Company’s internal projections) and (b) 80% of reasonably anticipated projected production from proved reserves for the second thirty (30) month rolling period of such sixty (60) month period (based on the most recently delivered reserve report). If the amount of borrowings outstanding exceed 50% of the borrowing base, the Company is required to hedge a minimum of 50% of the future production expected to be derived from proved developed reserves for the next eight quarters per its most recent reserve report. The Credit Facility also contains financial covenants requiring the Company to comply with a leverage ratio of the Company’s consolidated debt to consolidated EBITDAX (as defined in the credit agreement) for the period of four fiscal quarters then ended of not more than 4.00 to 1.00 and a current ratio of the Company’s consolidated current assets to consolidated current liabilities (as defined in the credit agreement to exclude non-cash assets and liabilities under ASC Topic 815 Derivatives and Hedging and ASC Topic 410 Asset Retirement and Environmental Obligations) as of the fiscal quarter ended of not less than 1.00 to 1.00. As of March 31, 2019, the Company was in compliance with the covenants under the Credit Facility. |
Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | Note 8 – Derivative Instruments The Company utilizes fixed price swaps and basis swaps to manage the price risk associated with the sale of its oil, natural gas and NGL production. Fixed price swaps are settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. Basis swaps are settled monthly based on differences between a fixed price differential and the applicable market price differential, the Panhandle Eastern Pipeline or Natural Gas Pipeline Company of America Mid Continent. When the referenced settlement price is less than the price specified in the contract, the Company receives an amount from the counterparty based on the price difference multiplied by the volume. Similarly, when the referenced settlement price exceeds the price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the volume. The following table reflects the Company’s open commodity contracts at March 31, 2019:
The Company nets the fair value of derivative instruments by counterparty in the accompanying condensed consolidated balance sheets where the right to offset exists. See Note 9 – Fair Value Measurements for further information regarding the fair value measurement of the Company’s derivatives. As the Company has elected to not account for commodity derivative instruments as hedging instruments, gains or losses resulting from the change in fair value along with the gains or losses resulting from settlement of derivative contracts are reflected in loss on derivative contracts included in the accompanying condensed consolidated statements of operations. The following table presents the Company’s loss on derivative contracts and net cash received (paid) upon settlement of its derivative contracts for the three months ended March 31, 2019 and 2018:
(1) Includes $0.4 million of cash received upon settlement of derivative contracts prior to their contractual maturity for the three months ended March 31, 2018. During 2018 and in 2019, the Company modified certain existing derivative contracts to comply with hedging requirements under its Credit Facility. During the three months ended March 31, 2019, the Company received $2.8 million of cash upon settlement of such modified derivative contracts. The cash settlements for these derivatives are classified as cash flows from financing activities in the accompanying condensed consolidated statement of cash flows due to the other-than-insignificant financing element contained in the modified derivative contract. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 9 – Fair Value Measurements The Company measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the following levels of the fair value hierarchy: Level 1— Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Level 2— Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1 that are either directly or indirectly observable as of the reporting date. Level 3— Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value. Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, considers the market for the Company’s financial assets and liabilities, the associated credit risk and other factors. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company recognizes transfers between fair value hierarchy levels as of the end of the reporting period in which the event or change in circumstances causing the transfer occurred. During the three months ended March 31, 2019 and 2018, the Company did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company’s recurring fair value measurements are performed for its commodity derivatives. Please refer to Note 8 – Derivative Instruments for additional discussion. Commodity Derivative Instruments Commodity derivative contracts are stated at fair value in the accompanying condensed consolidated balance sheets. The Company adjusts the valuations from the valuation model for nonperformance risk and for counterparty risk. The fair values of the Company’s commodity derivative instruments are classified as Level 2 measurements as they are calculated using industry standard models using assumptions and inputs which are substantially observable in active markets throughout the full term of the instruments. These include market price curves, contract terms and prices, credit risk adjustments, implied market volatility and discount factors. The following table presents the amounts and classifications of the Company’s derivative assets and liabilities as of March 31, 2019 and December 31, 2018, as well as the potential effect of netting arrangements on contracts with the same counterparty (in thousands):
Non-Recurring Fair Value Measurements The Company’s non‑recurring fair value measurements include the determination of the grant date fair value of the Company’s performance share units. The grant date fair value of the Company’s performance share units is determined using a Monte Carlo simulation model and is classified as a Level 3 measurement. Please refer to Note 11 – Equity Compensation for additional discussion. Other Financial Instruments The Company’s financial instruments, not otherwise recorded at fair value, consist primarily of cash, trade receivables, trade payables, and long-term debt. The carrying values of cash and cash equivalents, accounts payable, revenue payable, and accounts receivable approximate fair values due to the short-term maturities of these instruments and the carrying value of long-term debt approximates fair value as the applicable interest rates are variable and reflective of market rates. |
Equity |
3 Months Ended |
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Mar. 31, 2019 | |
Equity [Abstract] | |
Equity | Note 10 – Equity In September 2018 and in conjunction with the Reorganization, the Company issued 152.5 million shares of its Class A common stock to the members of Roan LLC in exchange for their equity interest in Roan LLC. The Reorganization was accounted for as a reverse recapitalization with Roan Inc. as the accounting acquirer and therefore did not result in any change in the accounting basis for the underlying assets. Net income before taxes and equity-based compensation were allocated ratably to the members of Roan LLC and the stockholders of Roan Inc. for the period before and after the Reorganization, respectively. For comparative purposes, the issuance of the shares to the members of Roan LLC at the time of the Reorganization was reflected on a retroactive basis with the units outstanding during each period presented. For the period of September 1, 2017 through the date of the Reorganization, Roan LLC was governed by the Amended and Restated Limited Liability Company Agreement of Roan Resources LLC. In connection with the Contribution in August 2017, Roan LLC issued 1.5 billion membership units representing capital interests in Roan LLC (the “LLC Units”) for a 50% equity interest in Roan LLC, to Linn in exchange for the contribution of oil and natural gas properties. Additionally, Roan LLC issued 1.5 billion LLC Units, which represented a 50% equity interest, to Citizen in exchange for the contribution of oil and natural gas properties. The fair value of the LLC Units issued to Citizen was the same as that of the LLC Units issued to Linn. In March 2018, Roan LLC issued 19.2 million LLC Units to each Citizen and Linn to settle amounts due for the leasehold acreage acquired on Roan LLC’s behalf during 2017. |
Equity Compensation |
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Equity Compensation | Note 11 – Equity Compensation The Company has adopted the Roan Resources, Inc. Amended and Restated Management Incentive Plan (the “Plan”), which provides for grants of options, stock appreciation rights, restricted stock unit, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards. Performance Share Units Prior to the Reorganization, Roan LLC granted performance share units to certain of its employees under the Roan LLC Management Incentive Plan. The performance share units were converted into awards of performance share units under the Plan, hereafter referred to as the “PSUs,” and are subject to the terms of the Plan and individual award agreements. The amount of PSUs that can be earned range from 0% to 200% based on the Company’s market value on December 31, 2020 (“Performance Period End Date”). The Company’s market value on the Performance Period End Date will be determined by reference to the volume-weighted average price of the Company’s Class A common stock for the 30 consecutive trading days immediately preceding the Performance Period End Date. Each earned PSU will be settled through the issuance of one share of the Company’s Class A common stock. Other than the security in which the PSUs are settled, no terms of the PSUs were modified in connection with the conversion of the PSUs. The following table presents activity for the Company’s PSUs during the three months ended March 31, 2019:
Compensation expense associated with the PSUs for the three months ended March 31, 2019 and 2018 was $3.0 million and $2.3 million, respectively, and is included in general and administrative expenses on the accompanying condensed consolidated statements of operations. Unrecognized expense as of March 31, 2019 for all outstanding PSU awards was $21.4 million and will be recognized over a weighted-average remaining period of 1.75 years. The grant date fair value of the PSUs was determined using a Monte Carlo simulation model, which results in an estimated percentage of performance share units earned and estimated Company value on the Performance Period End Date. The grant date fair value of the PSUs is expensed on a straight-line basis from the grant date to the Performance Period End Date. Restricted Stock Units Under the Plan, the Company is authorized to issue restricted stock units, hereafter referred to as the “RSUs,” to eligible employees and other service providers. The Company estimates the fair values of RSUs as the closing price of the Company’s Class A common stock on the grant date of the award, which is expensed over the applicable vesting period. The following table presents activity for the Company’s RSUs during the three months ended March 31, 2019:
Compensation expense associated with the RSUs for three months ended March 31, 2019 was $0.05 million and is included in general and administrative expenses on the accompanying condensed consolidated statements of operations. There were no RSUs issued prior to the Reorganization in 2018. Unrecognized expense as of March 31, 2019 for all outstanding RSUs was $0.1 million and will be recognized over a weighted-average remaining period of 0.58 years. Under the treasury stock method, both the PSUs and the RSUs are antidilutive for the weighted average share calculation and therefore are excluded from dilutive weighted average shares in the accompanying condensed consolidated statements of operations. |
Transactions with Affiliates |
3 Months Ended |
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Mar. 31, 2019 | |
Related Party Transactions [Abstract] | |
Transactions with Affiliates | Note 12 –Transactions with Affiliates Management Service Agreements Under the MSAs, Citizen and Linn provided certain services in respect to the oil and natural gas properties they contributed to Roan LLC. Such services included serving as operator of the oil and natural gas properties contributed, land administration, marketing, information technology and accounting services. As a result of Citizen and Linn continuing to serve as operator of the contributed assets and contracting directly with vendors for goods and services for operations, Citizen and Linn collected amounts due from joint interest owners for their share of costs and billed Roan LLC for its share of costs. The services provided under the MSAs ended in April 2018 when Roan LLC took over as operator for the oil and natural gas properties contributed by Citizen and Linn. In conjunction with the conclusion of the MSAs in April 2018, Roan LLC assumed certain working capital accounts associated with the properties contributed from Citizen and Linn. During the three months ended March 31, 2018, Roan LLC incurred approximately $7.5 million for charges related to the services provided under the MSAs, which were recorded in general and administrative expenses in the condensed consolidated statements of operations. As the MSA ended in April 2018, there were no such charges related to the MSA in the three months ended March 31, 2019. Acquisition of Acreage As provided for in the Contribution Agreement, Citizen and Linn acquired additional acreage totaling $63.0 million as of December 31, 2017 within an area of mutual interest on behalf of the Company. See Note 10 – Equity for further discussion of the settlement of the payable due to Citizen and Linn related to the additional acquired acreage. Natural Gas Dedication Agreement The Company has a gas dedication agreement with Blue Mountain Midstream LLC (“Blue Mountain”), a subsidiary of Riviera Resources, Inc. (“Riviera”), which has directors and shareholders in common with the Company. Amounts due from Blue Mountain at March 31, 2019 and December 31, 2018 are reflected as Accounts receivable – Affiliates in the accompanying condensed consolidated balance sheets and represent accrued revenue for the Company’s portion of the production sold to Blue Mountain. Sales to Blue Mountain are reflected as Natural gas sales – Affiliates and Natural gas liquids sales – Affiliates in the accompanying condensed consolidated statements of operations. See further discussion of this gas dedication agreement in Note 14 – Commitments and Contingencies. Corporate Office Lease During 2018, the Company entered into a lease for office space in Oklahoma City, Oklahoma that is owned by a subsidiary of Riviera under a lease with an initial term of 5 years with an option to extend the lease for an additional 5 years at the end of the initial term. The Company paid $0.3 million during the three months ended March 31, 2019 under this lease. Total remaining payments under the lease are $7.8 million, excluding the Company’s portion of the operating expenses of the building. Tax Matters Agreement In conjunction with the Reorganization, the Company entered into a tax matters agreement (“TMA”) with Riviera. See Note 13 – Income Taxes for further discussion of the TMA and the related amount paid to Riviera. Water Management Services Agreement In January 2019, the Company entered into a water management services agreement with Blue Mountain. Under this agreement, Blue Mountain will provide water management services including pipeline gathering, disposal, treatment and redelivery of recycled water. The agreement provides for an acreage dedication for water management services through January 2029. Blue Mountain began providing services under this agreement in April 2019. |
Income Taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 13 – Income Taxes As discussed in Note 1 – Business and Organization, Roan Inc. was formed in September 2018 in connection with the Reorganization. The Company’s accounting predecessor, Roan LLC, was treated as a flow-through entity for income tax purposes. As a result, the net taxable income or loss of Roan LLC and any related tax credits, for income tax purposes, flowed through to its members. Accordingly, no tax provision was made in the historical financial statements of Roan LLC since the income tax was an obligation of its members. Roan Inc. is a corporation and subject to U.S. federal and state income tax. The Company records its quarterly tax provision based on an estimate of the annual effective tax rate expected to apply to continuing operations for the various jurisdictions in which it operates. The Company’s effective combined U.S. federal and state income tax rate for the three months ended March 31, 2019 was 28.3% based on estimated net income for the year. The tax effects of certain items, such as tax rate changes, significant unusual or infrequent items, and certain changes in the assessment of the realizability of deferred taxes, are recognized as discrete items in the period in which they occur and are excluded from the estimated annual effective tax rate. In conjunction with the Reorganization, the Company entered into the TMA with Riviera. The TMA, in part, provides for the indemnification of the Company and the entitlement of Riviera to refunds related to certain taxes of Linn Energy, Inc. prior to the spinoff of Riviera from Linn Energy, Inc. As a result of the TMA and the refund of an overpayment of estimated federal taxes by Linn Energy, Inc. related to the Riviera business that was received by the Company in November 2018, the Company paid $7.6 million to Riviera during the three months ended March 31, 2019. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Note 14 – Commitments and Contingencies Lease Commitments As discussed in Note 3 - Lease Accounting, we lease certain office buildings, drilling rigs, and field equipment under cancelable and non-cancelable leases to support our operations. The Company’s lease costs for the three months ended March 31, 2019 included operating lease costs of $0.4 million and short-term lease costs of $33.5 million. Short-term lease costs exclude leases with a contract term of one month or less. Included in short-term lease costs is $32.2 million of gross costs related to the Company’s drilling rig leases. The Company’s portion of the drilling rig costs are capitalized to oil and natural gas properties and the remainder is billed out to third-party interest owners for their share of such costs. Payments made for operating leases included in lease liabilities for the three months ended March 31, 2019 were $0.3 million. The Company’s condensed consolidated balance sheet as of March 31, 2019 included lease assets and liabilities as follows (in thousands):
The weighted average remaining lease term for our operating leases is 4.1 years and the weighted average discount rate is 8.5%. The Company’s operating lease liabilities as of March 31, 2019 with enforceable contract terms that are greater than one year mature as follows (in thousands):
Litigation The Company is party to lawsuits arising in the ordinary course of business, including, but not limited to, commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions. The Company cannot predict the outcome of any such lawsuits with certainty, but management does not currently believe that any pending or threatened legal matters will have a material adverse impact on the Company’s financial condition. Due to the nature of its business, the Company is, from time to time, involved in other routine litigation or subject to disputes or claims related to its business activities, including workers’ compensation claims and employment related disputes. In the opinion of management, none of these other pending litigation disputes or claims against the Company, if decided adversely, will have a material adverse effect on the Company’s financial condition, cash flows or results of operations. Environmental Matters The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. These laws, which are often changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. The Company has established procedures for the ongoing evaluation of its operations to identify potential environmental exposures and to comply with regulatory policies and procedures. At March 31, 2019, the Company had no environmental matters requiring specific disclosure or requiring the recognition of a liability. Natural Gas Dedication Agreements The Company has dedicated its natural gas production from the oil and natural gas properties contributed by Citizen under an agreement with a third party. Under this dedication agreement, the Company is required to deliver its natural gas production from the contract area, as defined in the agreement, through November 2030. There is no specified volume or volume penalty in the agreement. For the oil and natural gas properties contributed by Linn, the Company assumed Linn’s dedication agreement with Blue Mountain. The agreement with Blue Mountain requires the Company to deliver its natural gas production from the contract area, as defined in the agreement, through November 2030. There is no specified volume or volume penalty in the agreement. Volume Commitment Under an agreement with a third party, the Company has a requirement to deliver a minimum volume of natural gas from a specified area, as defined in the agreement. In the event that the Company is unable to meet this natural gas volume delivery commitment, it would incur deficiency fees on any undelivered volumes as of November 2021. Based on expected production from currently producing wells in the specified area, the Company anticipates that it may not deliver the required minimum volume of natural gas by November 2021. As a result, the Company has accrued $0.4 million for its share of the estimated shortfall deficiency fees as of March 31, 2019. The accrued liability is included in other noncurrent liabilities in the accompanying condensed consolidated balance sheet. If the Company is unable to deliver any natural gas volumes subsequent to March 31, 2019 through November 2021, total shortfall deficiency fees of $7.5 million would be due at the end of the commitment period. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements of the Company include the accounts of Roan Inc. and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated. |
Interim Financial Statements | Interim Financial Statements The accompanying condensed consolidated financial statements as of December 31, 2018 were derived from the annual financial statements included in the Annual Report on Form 10-K. The unaudited interim condensed consolidated financial statements for the three months ended March 31, 2019 and 2018 were prepared by the Company in accordance with the accounting policies stated in the audited financial statements. In the opinion of management, the Company’s unaudited condensed consolidated financial statements reflect all known adjustments necessary to fairly state the financial position of the Company and its results of operations and cash flows for such periods. All such adjustments are of a normal, recurring nature. Certain information and disclosures normally included in financial statements prepared in conformity with GAAP have been consolidated or omitted, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual financial statements and notes thereto. |
Use of Estimates | Use of Estimates The preparation of financial statements and related footnotes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. A significant item that requires management’s estimates and assumptions is the estimate of proved oil, natural gas and NGL reserves which are used in the calculation of depletion of the Company’s oil and natural gas properties and impairment, if any, of proved oil and natural gas properties. Changes in estimated quantities of its reserves could impact the Company’s reported financial results as well as disclosures regarding the quantities and value of proved oil and natural gas reserves. Although management believes these estimates are reasonable, actual results could differ from these estimates. |
Recent Accounting Standards Issued | Recent Accounting Standards Issued In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASC 842”). This update applies to any entity that enters into a lease, with some specified scope exemptions. Under this update, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. While there were no major changes to the lessor accounting, changes were made to align key aspects with the revenue recognition guidance. The Company adopted the new standard using the simplified transition method described in ASU 2018-11 Leases (Topic 842): Targeted Improvements as of January 1, 2019 and did not retrospectively apply the new standard to periods before adoption. Accordingly, comparative information has not been adjusted and continues to be reported under the previous leasing standard. See Note 3 - Lease Accounting for additional information on the adoption of ASC 842. |
Revenue from Contracts with Customers | Revenues from the sale of oil, natural gas and NGLs are recognized when control of the product has been transferred to the customer, all performance obligations have been satisfied and collectability is reasonably assured. We recognize revenues from the sale of oil, natural gas and NGLs based on our share of volumes sold. Performance Obligations The Company satisfies the performance obligations under its oil and natural gas sales contracts through delivery of its production and transfer of control to a customer. Upon delivery of production, the Company has the right to receive consideration from its customers in amounts that correspond with the value of the production transferred. The Company typically receives payment for oil, natural gas and NGL sales within 30 days of the month of delivery for operated properties and within 90 days of the month of delivery for non-operated properties. The Company’s oil sales contracts are short-term in nature with a contract term of one year or less. For those contracts, the Company utilized the practical expedient in Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which provides an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. For the Company’s natural gas and NGL sales contracts that have a contract term greater than one year, the Company utilized the practical expedient in ASC 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. Contract Balances The Company recognizes sales of oil, natural gas, and NGLs at a point in time when it satisfies a performance obligation and at that point the Company has an unconditional right to receive payment. Accordingly, these contracts do not give rise to contract assets or contract liabilities under ASC 606. The Company had accounts receivable related to revenue from contracts with customers as of March 31, 2019 and December 31, 2018 of approximately $57.7 million and $65.2 million, respectively, which represent this unconditional right to receive payment. Prior Period Performance Obligations To record revenues for oil, natural gas and NGLs, the Company estimates the amount of production delivered at the end of each month and the prices expected to be received for those sales. Differences between estimated revenues and actual amounts received for all prior months are recorded in the month payment is received from the customer. For the three months ended March 31, 2019 and 2018, revenue recognized related to performance obligations satisfied in prior reporting periods was not material. |
Fair Value Measurements | The Company measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the following levels of the fair value hierarchy: Level 1— Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Level 2— Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1 that are either directly or indirectly observable as of the reporting date. Level 3— Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value. Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, considers the market for the Company’s financial assets and liabilities, the associated credit risk and other factors. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis. The Company recognizes transfers between fair value hierarchy levels as of the end of the reporting period in which the event or change in circumstances causing the transfer occurred. |
Lease Accounting (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of Adoption of ASC 842 | The following table shows the impact of the adoption of ASC 842 on the Company’s current period balance sheet as compared to the previous lease accounting standard, ASC Topic 840, Leases (“ASC 840”):
|
Oil and Natural Gas Properties (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalized Costs Relating to Oil, Natural Gas and NGL Producing Activities | The oil and natural gas properties include the following:
|
Asset Retirement Obligations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Reconciliation of Asset Retirement Obligations | The following is a reconciliation of the changes in the Company’s asset retirement obligation (“ARO”) for the three months ended March 31, 2019 (in thousands):
(1) The current portion of the ARO liability is included in other current liabilities on the condensed consolidated balance sheet. |
Long-Term Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Applicable Margin for LIBOR Rate Loans Depending on the Utilization Level | The pricing grid below shows the applicable margin for LIBOR rate or ABR loans as well as the commitment fee depending on the Utilization Level (as defined in the credit agreement):
|
Derivative Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Company's Open Commodity Contracts | The following table reflects the Company’s open commodity contracts at March 31, 2019:
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Schedule of Net Gains and Loss on Derivative Contracts | The following table presents the Company’s loss on derivative contracts and net cash received (paid) upon settlement of its derivative contracts for the three months ended March 31, 2019 and 2018:
(1) Includes $0.4 million of cash received upon settlement of derivative contracts prior to their contractual maturity for the three months ended March 31, 2018. |
Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Classifications of the Company's Derivative Assets and Liabilities | The following table presents the amounts and classifications of the Company’s derivative assets and liabilities as of March 31, 2019 and December 31, 2018, as well as the potential effect of netting arrangements on contracts with the same counterparty (in thousands):
|
Equity Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Activity | The following table presents activity for the Company’s RSUs during the three months ended March 31, 2019:
The following table presents activity for the Company’s PSUs during the three months ended March 31, 2019:
|
Commitments and Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Lease Assets and Liabilities | The Company’s condensed consolidated balance sheet as of March 31, 2019 included lease assets and liabilities as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Lease Liabilities Payments | The Company’s operating lease liabilities as of March 31, 2019 with enforceable contract terms that are greater than one year mature as follows (in thousands):
|
Business and Organization - Additional information (Details) |
Aug. 31, 2017 |
---|---|
Citizen | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentage | 50.00% |
Linn | |
Schedule of Equity Method Investments [Line Items] | |
Ownership percentage | 50.00% |
Lease Accounting (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other noncurrent assets | $ 12,967 | $ 7,659 |
Other current liabilities | 2,552 | 790 |
Other noncurrent liabilities | 5,679 | $ 902 |
Under ASC 842 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other noncurrent assets | 6,068 | |
Other current liabilities | 1,813 | |
Other noncurrent liabilities | 5,326 | |
Under ASC 840 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other noncurrent liabilities | 1,071 | |
Increase/(decrease) | Under ASC 842 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other noncurrent assets | 6,068 | |
Other current liabilities | 1,813 | |
Other noncurrent liabilities | $ 4,255 |
Revenue from Contracts with Customers - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||
Performance Obligations | The Company satisfies the performance obligations under its oil and natural gas sales contracts through delivery of its production and transfer of control to a customer. Upon delivery of production, the Company has the right to receive consideration from its customers in amounts that correspond with the value of the production transferred. The Company typically receives payment for oil, natural gas and NGL sales within 30 days of the month of delivery for operated properties and within 90 days of the month of delivery for non-operated properties. The Company’s oil sales contracts are short-term in nature with a contract term of one year or less. For those contracts, the Company utilized the practical expedient in Revenue from Contracts with Customers (Topic 606) (“ASC 606”), which provides an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. For the Company’s natural gas and NGL sales contracts that have a contract term greater than one year, the Company utilized the practical expedient in ASC 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. | |
Contract with customer accounts receivable | $ 57.7 | $ 65.2 |
Oil and Natural Gas Properties - Schedule of Oil and Natural Gas Properties (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Oil and Gas Property [Abstract] | ||
Proved | $ 1,730,526 | $ 1,538,379 |
Unproved | 1,070,619 | 1,089,954 |
Less: accumulated depreciation, depletion, amortization and impairment | (282,541) | (230,836) |
Oil and natural gas properties, net | $ 2,518,604 | $ 2,397,497 |
Oil and Natural Gas Properties - Additional Information (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | ||
Amortization expense | $ 11,300,000 | $ 7,400,000 |
Impairment of proved oil and natural gas properties | $ 0 | $ 0 |
Asset Retirement Obligations - Schedule of Reconciliation of Asset Retirement Obligations (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | ||
Asset retirement obligation, beginning balance | $ 16,848 | |
Liabilities incurred or acquired | 667 | |
Revisions in estimated cash flows | 0 | |
Liabilities settled | (87) | |
Accretion expense | 278 | |
Asset retirement obligation, ending balance | 17,706 | |
Less: current portion of obligations | 739 | |
Asset retirement obligation – long term | $ 16,967 | $ 16,058 |
Derivative Instruments - Schedule of Net Gains and Loss on Derivative Contracts (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Loss on derivative contracts | $ (83,642) | $ (9,614) |
Net cash received (paid) upon settlement of derivative contracts | $ 5,382 | (4,138) |
Net cash received upon settlement of derivative contracts prior to contractual maturity | $ 400 |
Derivative Instrument - Additional Information (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Cash received on settlement of hedge | $ 2.8 |
Equity - Additional Information (Details) - shares |
1 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2018 |
Aug. 31, 2017 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
|
Capital Unit [Line Items] | |||||
Common shares issued (shares) | 152,539,532 | 152,539,532 | |||
Members of Roan LLC | Class A common stock | |||||
Capital Unit [Line Items] | |||||
Common shares issued (shares) | 152,500,000 | ||||
Linn Energy Holdings | Roan LLC | |||||
Capital Unit [Line Items] | |||||
Ownership percentage | 50.00% | ||||
Linn Energy Holdings | Membership units | Roan LLC | |||||
Capital Unit [Line Items] | |||||
Units issued (shares) | 19,200,000.0 | 1,500,000,000.0 | |||
Citizen | Roan LLC | |||||
Capital Unit [Line Items] | |||||
Ownership percentage | 50.00% | ||||
Citizen | Membership units | Roan LLC | |||||
Capital Unit [Line Items] | |||||
Units issued (shares) | 19,200,000.0 | 1,500,000,000.0 |
Equity Compensation - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
PSU | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 3,000 | $ 2,300 | |
Unrecognized expense | $ 21,400 | ||
Weighted average remaining period | 1 year 9 months | ||
PSU | Scenario, Forecast | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Consecutive trading days | 30 days | ||
PSU | Scenario, Forecast | Minimum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Awarded PSUs recipient vesting | 0.00% | ||
PSU | Scenario, Forecast | Maximum | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Awarded PSUs recipient vesting | 200.00% | ||
Restricted Stock Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Compensation expense | $ 50 | ||
Unrecognized expense | $ 100 | ||
Weighted average remaining period | 7 months |
Transactions with Affiliates - Additional Information (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Related Party Transaction [Line Items] | ||||
Accounts payable and accrued liabilities – Affiliates | $ 0 | $ 8,577,000 | ||
Total | 7,139,000 | |||
Linn Energy Holdings and Citizen Energy LLC | ||||
Related Party Transaction [Line Items] | ||||
Accounts payable and accrued liabilities – Affiliates | $ 63,000,000 | |||
MSAs | ||||
Related Party Transaction [Line Items] | ||||
Charges related to services | $ 0 | $ 7,500,000 | ||
Corporate office lease | Riviera | Affiliates | ||||
Related Party Transaction [Line Items] | ||||
Initial term | 5 years | |||
Renewal term | 5 years | |||
Lease expense | $ 300,000 | |||
Total | $ 7,800,000 |
Income Taxes - Additional Information (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Effective combined U.S. federal and state income excluding discrete items, tax rate | 28.30% |
Riviera | TMA | |
Related Party Transaction [Line Items] | |
Amount paid | $ 7.6 |
Commitments and Contingencies - Additional Information (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease costs | $ 0.4 |
Lessee, Lease, Description [Line Items] | |
Short-term lease costs | 33.5 |
Operating cash flows related to operating leases | $ 0.3 |
Weighted average remaining lease term | 4 years 1 month |
Weighted average discount rate | 8.50% |
Accrued deficiency fee | $ 0.4 |
Deficiency fees | 7.5 |
Drilling Rig | |
Lessee, Lease, Description [Line Items] | |
Short-term lease costs | $ 32.2 |
Commitments and Contingencies - Lease Assets and Liabilities (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease right of use assets | $ 6,068 |
Current operating lease liabilities | 1,813 |
Noncurrent operating lease liabilities | 5,326 |
Total operating lease liabilities | $ 7,139 |
Commitments and Contingencies - Schedule of Operating Lease Liabilities Payments (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 1,384 |
2020 | 2,046 |
2021 | 2,136 |
2022 | 2,229 |
2023 | 456 |
Thereafter | 171 |
Total lease payments | 8,422 |
Less imputed interest | (1,283) |
Total | $ 7,139 |
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