EX-99.1 2 d790900dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

NEWS RELEASE

RIVIERA RESOURCES REPORTS SECOND-QUARTER 2019 RESULTS

HOUSTON, August 8, 2019 – Riviera Resources, Inc. (OTCQX: RVRA) (“Riviera” or the “Company”) and its wholly owned subsidiary, Blue Mountain Midstream LLC (“Blue Mountain”) announces financial and operating results for the second quarter 2019 and provides a strategic update.

The Company highlights the following accomplishments:

 

   

Increased previously announced $100 million share repurchase authorization to a total of $150 million

 

   

Returned over $140 million of capital to shareholders through share repurchases and tender offer since the beginning of the year, and over $290 million in the last twelve months

 

   

Closed the sale of certain non-operated properties located in the Hugoton Basin for proceeds of approximately $31 million, and Michigan assets for proceeds of approximately $39 million, both at a premium to PDP PV-10 value

 

   

Ended the second quarter with a consolidated cash balance of ~$80 million and $33.5 million drawn on the Blue Mountain Credit Facility

Blue Mountain highlights:

 

   

Continued its ongoing engagement with Tudor, Pickering, Holt & Co. to review strategic alternatives to unlock unrealized value

 

   

Executed crude oil gathering agreement with Roan Resources, Inc.

 

   

Initiated water management services and moved approximately 5.1 million barrels in the second quarter

 

   

Acquired 100% interests in Lumen Midstream Partnership, LLC in August 2019, for a total investment of less than $5 million

Riviera Upstream highlights:

 

   

Outperformed second quarter upstream guidance, as provided in our May 2019 earnings release, with respect to Adjusted EBITDAX and production, on lower capital spending

 

   

Drilled and completed 6 NW STACK operated wells and 2 North Louisiana operated wells in the first half of 2019 with excellent results

David Rottino, Riviera’s President and Chief Executive Officer, commented, “I am very pleased with Riviera’s performance in the second quarter. Operationally, our base assets outperformed original guidance and our drilling program focused in the Northwest STACK and North Louisiana looks very encouraging. We remain relentlessly focused on our commitment to maximizing shareholder value through our strategy of capital discipline, returning capital to shareholders and efficiently managing our assets. We continue to believe our shares are deeply undervalued and we are committed to finding ways to monetize assets and use cash on hand to return capital to shareholders. So far this year, we monetized our Arkoma and Michigan assets, a portion of our helium reserves, and our interests in certain non-operated assets in the Hugoton Basin. Additionally, we returned over $140 million of capital to shareholders through our ongoing share repurchase program and recently completed tender offer. Furthermore, the Board authorized an increase to the previously announced $100 million share repurchase program to a total of $150 million. Finally, we continue to grow our exciting Blue Mountain midstream business, and recently announced the execution of a new crude oil gathering agreement with Roan Resources, expanding and diversifying their service offerings, as well as better positioning it towards a value enhancing transaction.”

 

1


Key Financial Results (1)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  

$ in millions

   2019     2018     2019      2018  

Average daily production (MMcfe/d)

     286       312       275        356  

Total oil, natural gas and NGL revenues

   $ 67     $ 87     $ 143      $ 224  

(Loss) income from continuing operations

   $ (7   $ 9     $ 6      $ 44  

(Loss) income from discontinued operations, net of income taxes

   $ —       $ (2   $ —        $ 34  

Net (loss) income

   $ (7   $ 7     $ 6      $ 78  

Adjusted EBITDAX (a non-GAAP financial measure) (2)

   $ 35     $ 11     $ 64      $ 51  

Net cash provided by operating activities

   $ 21     $ 6     $ 59      $ 57  

Oil and natural gas capital

   $ 16     $ 7     $ 54      $ 17  

Total capital

   $ 41     $ 42     $ 102      $ 109  

 

(1)

All amounts reflect continuing operations with the exception of net income for the three months and six months ended June 30, 2018, respectively.

(2)

Includes severance costs of approximately $14 million and $18 million for the three months and six months ended June 30, 2018, respectively.

Strategic Update

The Company’s Board of Directors (the “Board”) and management believe the Company is trading at a significant discount to its sum-of-the-parts net asset value. The Company has engaged Tudor, Pickering, Holt & Co. to assist in the review and execution of strategic alternatives for Blue Mountain through a value enhancing transaction. Furthermore, the Company will continue to return capital to shareholders through free cash flow generated from efficiently managing our assets, and by opportunistically monetizing additional assets.

Opportunistic Asset Monetizations

Thus far in 2019, the Company has closed four transactions that in combination generated proceeds of approximately $216 million. The proceeds from the four deals are at a premium to the PDP PV-10 value. The four transactions include the sale of the Arkoma Basin assets (closed January 2019), the sale of certain non-operated properties located in the Hugoton Basin (closed May 2019), the sale of properties located in Michigan (closed July 2019), and the monetization of a portion of the Company’s helium reserves in the Hugoton Basin utilizing a VPP structure (closed March 2019).

The Company has also signed definitive agreements to sell its interest in properties located in Illinois, and certain non-core properties located in North Louisiana that are expected to close in Q3 2019, that in combination are expected to generate estimated proceeds of approximately $7 million.

Successful Tender Offer

The Company continues to focus on enhancing shareholder value and finding ways to return capital to its shareholders. On June 13, 2019, it announced the intention to commence a tender offer to purchase $40 million of the Company’s common stock. The tender offer was completed on July 16, 2019. The Company repurchased an aggregate of 2,666,666 shares of common stock at a price of $15.00 per share for a total cost of approximately $40 million (excluding expenses of the tender offer). The shares acquired represented approximately 4% of the Company’s outstanding shares as of June 13, 2019.

Continuation of Share Repurchase Plan

On August 16, 2018, the Board authorized the repurchase of up to $100 million of the Company’s outstanding shares of common stock. Through June 2019, the Company repurchased an aggregate of 6,589,110 shares at an average price of $14.56 for a total cost of approximately $96 million. In the second quarter alone the Company bought back 3,147,156 shares at an average price of $13.76 for a total cost of approximately $43 million.

In accordance with the Securities Exchange Commission’s regulations regarding issuer tender offers, the Company’s share repurchase program was suspended concurrent with the June 13, 2019 announcement of the intent to commence a tender offer as discussed above.

 

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The Company expects to continue repurchasing shares, and on July 18, 2019 announced that the Board authorized an increase to the previously announced $100 million share repurchase program to a total of up to $150 million. Subsequent to July 18, 2019, the Company repurchased an aggregate of 2,122,478 shares of common stock for a total cost of approximately $22 million. As of August 7, 2019, approximately $32 million was available for share repurchase under the program.

Second Quarter 2019 Activity – Upstream Assets

Riviera’s production for the second quarter averaged approximately 286 MMcfe/d, which exceeds the high end of our original guidance range. The outperformance in production is mainly due to the outperformance of our NW STACK and North Louisiana drilling programs.

With respect to costs, the Company had strong results in the second quarter. Upstream capital expenditures were approximately $17 million compared to original guidance of $19 million. Adjusted G&A expenses were approximately $7 million. Operating expenses were approximately $44 million, 8% below the mid-point of our original guidance for the quarter, primarily driven by a non-recurring net refund of Texas sales and use tax of approximately $4 million.

Northwest STACK / North Louisiana Operated Drilling Program

Riviera’s operated NW STACK drilling program progressed on schedule with the Company turning to production 3 operated wells in the second quarter, for a total of 6 operated wells turned to production year to date. The average IP30 rate of the 6 operated wells is approximately 670 boepd with 55% oil and 72% liquids. All of these wells are single mile laterals with a target capital cost of $4.9 million to $5.2 million, which is expected to generate a 30% to 40% IRR.

The Company completed a two well pad in North Louisiana late in the first quarter. These wells achieved a choke restricted average IP30 of approximately 20 MMcfe/d. The expected IRR of these wells is over 100% and payback is expected in less than 12 months.

Blue Mountain Business Update

On average for the second quarter of 2019, natural gas throughput was 120 MMcf/d and Natural Gas Liquids (“NGLs”) produced were 10,590 bpd, a 92% increase as compared to the second quarter of 2018 at 62 MMcf/d and a 2% increase compared with the first quarter of 2019 at 117 MMcf/d. During the second quarter, five wells were turned to sales on our system; however, throughput volumes were slightly impacted as our primary customer temporarily shut-in five wells due to hydraulic fracturing of neighboring wells. Throughput volumes are expected to increase during the remainder of 2019 based on the current well attachment schedules provided by our customers. On August 5, 2019, Blue Mountain acquired 100% interests in Lumen Midstream Partnership, LLC, including approximately 55 miles of natural gas gathering pipelines and an 18 MMcf/d processing plant. The Lumen system will be interconnected to the Blue Mountain system for a total investment of less than $5 million. “The acquisition of the Lumen assets will secure over 15 customers, reroute volumes to our Cryo I plant by the fourth quarter and extend our reach into the Merge for our three gathering service options,” commented Greg Harper, President and CEO of Blue Mountain.

On April 1, 2019, Blue Mountain began providing water management services for Roan Resources. During the second quarter, the company hauled 5.1 million barrels of water in total, averaging 56,100 bpd, for Roan Resources and a third-party customer. In addition, during the quarter, Blue Mountain made significant progress in the construction of its water gathering system, with first pipeline connections in service in July. Also, Blue Mountain acquired the land and permits for two of its future owned and operated saltwater disposal wells and expects completion of at least one well by the end of the third quarter of 2019.

During the second quarter of 2019, Blue Mountain was impacted by overall lower commodity prices, including a 20% reduction in the weighted average barrel NGL price from the first quarter of 2019. Despite this major challenge, Blue Mountain’s second quarter Adjusted EBITDA decreased by only $1 million compared with first quarter results, benefited by the new fee-based water margins and steady gas throughput volumes. In the second quarter of 2019, the business continued to be impacted by the NGL pricing differentials at Conway and Mont Belvieu. The elimination of the basis exposure would have added $0.7 million to Blue Mountain’s margin. Management has hedged a material portion of its exposure to the NGL pricing differentials at Conway and Mont Belvieu for 2019 and expects to eliminate all basis dislocation by the first quarter of 2020 when ONEOK’s Arbuckle II Pipeline is completed.

 

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Capital expenditures for the second quarter were approximately $24 million, with the majority of capital being invested in the construction of water gathering pipelines.

Harper added, “I’m very pleased with Blue Mountain’s performance over the quarter. Our water business is off to a solid start, and we have made significant strides in diversifying our revenue stream going forward with the addition of crude oil gathering. As our water business becomes established moving to our piped system coupled with our recently announced crude oil gathering system, and with Roan’s projected volume ramp during the second half of 2019, I’m excited about our momentum becoming a top tier midstream enterprise as we move towards 2020.”

Balance Sheet and Liquidity

Riviera and Blue Mountain have established separate credit facilities. As of June 30, 2019, there were no borrowings outstanding on Riviera’s revolving credit facility, and borrowing commitments of up to $245 million with available borrowing capacity of approximately $211 million, inclusive of outstanding letters of credit. In July 2019, Riviera’s borrowing base was reduced to $230 million due to the sale of its properties located in Michigan, with available borrowing capacity of approximately $197 million, inclusive of outstanding letters of credit.

As of June 30, 2019, Blue Mountain had approximately $33.5 million drawn on its revolving credit facility, and borrowing commitments of up to $200 million with available borrowing capacity of approximately $155 million, including outstanding letters of credit, subject to covenant restrictions in the Blue Mountain Credit Facility.

 

4


Second Quarter Actuals

Below is a summary of the Company’s consolidated second quarter results.

 

     Q2 2019
Actuals
    Q2 2019
Actuals
    Q2 2019
Actuals
 
     Upstream     Blue Mountain     Consolidated  

Net Production (MMcfe/d)

     286         286  

Natural gas (MMcf/d)

     236         236  

Oil (Bbls/d)

     1,933         1,933  

NGL (Bbls/d)

     6,363         6,363  

Other revenues, net (in thousands) (1)

   $ 8,064  (2)    $ 11,668  (3)    $ 19,732  (4) 

Helium revenues

   $ 4,810  (5)      $ 4,810  (5) 

Jayhawk / Other

   $ 3,254       $ 3,254  

Blue Mountain

     $ 11,668  (3)    $ 11,668  (3) 

Costs (in thousands)

   $ 43,789     $ 708     $ 44,497  

Lease operating expenses

   $ 23,845       $ 23,845  

Transportation expenses

   $ 18,053       $ 18,053  

Taxes, other than income taxes

   $ 1,891  (6)    $ 708     $ 2,599  (6) 

Adjusted general and administrative expenses (Non-GAAP) (7)

   $ 6,990  (8)    $ 2,875  (9)    $ 9,865  (10) 

Targets (in thousands)

      

Adjusted EBITDAX (Non-GAAP)

   $ 28,761     $ 5,887     $ 34,648  

Cash interest expense (Non-GAAP) (11)

   $ 999     $ 229     $ 1,228  

Oil and natural gas capital

   $ 16,054       $ 16,054  

Total capital

   $ 17,291     $ 23,539     $ 40,830  

 

(1)

Includes other revenues and margin on marketing activities

(2)

Includes other revenues of approximately $5.2 million, plus marketing revenues of approximately $10.7 million, less marketing expenses of approximately $7.8 million for the three months ended June 30, 2019

(3)

Includes marketing revenues of approximately $42.6 million, less adjusted marketing expenses of approximately $30.9 million. Adjusted marketing expenses is a non-GAAP measure that excludes share-based compensation expenses of less than $0.1 million

(4)

Includes other revenues of approximately $5.2 million, plus marketing revenues of approximately $53.3 million, less adjusted marketing expenses of approximately $38.8 million. Adjusted marketing expenses is a non-GAAP measure that excludes share-based compensation expenses of less than $0.1 million and losses on derivatives of approximately $2.9 million

(5)

Includes helium revenues from the VPP Interests of approximately $3.7 million

(6)

Includes a reduction to taxes, other than income taxes costs for non-recurring refund of Texas sales and use tax, net of professional service claim fees, of approximately $4.4 million

(7)

Adjusted general and administrative expenses is a non-GAAP measure that excludes share-based compensation expenses and severance expenses presented for the purpose of comparing to guidance

(8)

For the three months ended June 30, 2019 represents general and administrative expenses of approximately $8.8 million, excluding share-based compensation expenses of approximately $1.8 million

(9)

For the three months ended June 30, 2019 represents general and administrative expenses of approximately $4.7 million, excluding share-based compensation expenses of approximately $1.8 million

(10)

For the three months ended June 30, 2019 represents general and administrative expenses of approximately $13.5 million, excluding share-based compensation expenses of approximately $3.6 million

(11)

Excludes non cash amortization

 

5


Upstream Segment – Second Quarter Actuals versus Guidance

The comparison to guidance below is for the upstream assets only. The Company did not provide second quarter 2019 guidance for Blue Mountain.

 

     Q2 2019
Actuals
    Original Guidance (1)
Q2 2019E
    Updated Guidance (1)
Q2 2019E
 

Net Production (MMcfe/d)

     286       255 – 285       280 – 290  

Natural gas (MMcf/d)

     236       210 – 235       230 – 240  

Oil (Bbls/d)

     1,933       1,600 – 1,850       1,875 – 2,000  

NGL (Bbls/d)

     6,363       5,900 – 6,500       6,300 – 6,400  

Other revenues, net (in thousands) (2)

   $ 8,064  (3)    $ 5,500 – $ 7,500     $ 7,000 – $ 8,500  

Helium revenues

   $ 4,810  (4)    $ 4,500 – $5,500  (4)    $ 4,500 – $ 5,000  (4) 

Jayhawk / Other

   $ 3,254     $ 1,000 – $ 2,000     $ 2,500 – $3,500  

Costs (in thousands)

   $ 43,789     $ 45,000 – $50,000     $ 42,000 – $46,000  

Lease operating expenses

   $ 23,845     $ 23,000 – $25,000     $ 23,000 – $25,000  

Transportation expenses

   $ 18,053     $ 17,000 – $18,000     $ 17,500 – $18,500  

Taxes, other than income taxes

   $ 1,891  (5)    $ 5,000 – $ 7,000     $ 1,500 – $2,500  (4) 

Adjusted general and administrative expenses (Non-GAAP) (6)

   $ 6,990  (7)    $ 7,500 – $ 9,000     $ 6,500 – $7,500  

Targets (Mid-Point) (in thousands)

      

Adjusted EBITDAX (Non-GAAP)

   $ 28,761     $ 23,000     $ 25,000 – $30,000  

VPP Notes interest expense (8)

   $ 1,045     $ 1,000     $ 1,050  

VPP Notes principal

   $ 2,649     $ 3,000     $ 2,650  

Capital expenditures

   $ 17,291     $ 19,000     $ 17,500  

 

(1)

Original guidance estimates provided in May 9, 2019 first quarter earnings release; updated guidance provided in July 9, 2019 press release

(2)

Includes other revenues and margin on marketing activities

(3)

Includes other revenues of approximately $5.2 million, plus marketing revenues of approximately $10.7 million, less marketing expenses of approximately $7.8 million for the three months ended June 30, 2019

(4)

Includes helium revenues from the VPP Interests of approximately $3.7 million

(5)

Includes a reduction to taxes, other than income taxes costs for non-recurring refund of Texas sales and use tax, net of professional service claim fees, of approximately $4.4 million

(6)

Adjusted general and administrative expenses is a non-GAAP measure that excludes share-based compensation expenses and severance expenses presented for the purpose of comparing to guidance

(7)

For the three months ended June 30, 2019 represents general and administrative expenses of approximately $8.8 million, excluding share-based compensation expenses of approximately $1.8 million

(8)

Excludes non cash amortization

 

6


Upstream Segment – Third Quarter and Full Year 2019 Guidance

The guidance below is for the upstream assets only. Guidance estimates have been adjusted for the sale of properties located in Michigan that closed July 3, 2019, and the sales of Illinois assets and non-core North Louisiana properties that are expected to close in the third quarter. 2019 guidance estimates include the Adjusted EBITDAX from the Helium VPP transaction that closed in March, 2019.

 

     Q3 2019E   FY 2019E  

Net Production (MMcfe/d)

   233 – 255     240 – 270  

Natural gas (MMcf/d)

   185 – 205     195 – 220  

Oil (Bbls/d)

   1,900 – 2,100     1,500 – 1,800  

NGL (Bbls/d)

   6,000 – 6,300     6,000 – 6,500  

Other revenues, net (in thousands) (1)

   $ 7,000 – $9,000     $ 36,000 – $40,000  

Helium revenues

   $4,500 – $5,500 (2)     $20,000 – $22,000 (3)  

Jayhawk / Other

   $ 2,500 – $ 3,500     $16,000 – $18,000  

Costs (in thousands)

   $36,500 – $41,500     $165,000 – $175,000  

Lease operating expenses

   $17,000 – $19,000     $ 81,000 – $ 85,000  

Transportation expenses

   $ 16,000 – $17,000     $ 68,000 – $ 72,000  

Taxes, other than income taxes

   $ 3,500 – $5,500     $ 16,000 – $ 18,000  

Adjusted general and administrative expenses (Non-GAAP) (4), (6)

   $ 8,500 – $9,500     $ 32,000 – $ 35,000  

General and administrative- severance expenses

   $ 1,500 – $2,000     $  1,500 – $   2,000   

Costs per Mcfe (Mid-Point)

   $ 1.75     $ 1.82  

Lease operating expenses

   $ 0.80     $ 0.89  

Transportation expenses

   $ 0.74     $ 0.75  

Taxes, other than income taxes

   $ 0.21     $ 0.18  

Targets (Mid-Point in thousands)

    

Adjusted EBITDAX (Non-GAAP) (5), (6)

   $ 19,000     $ 91,000  

Capital expenditures

   $ 9,000     $ 68,000  

VPP Notes interest expense payments

   $ 1,000     $ 3,000  

VPP Notes principal payments

   $ 2,700     $ 8,000  

Weighted Average NYMEX Differentials

    

Natural gas (MMBtu)

   ($0.55) – ($0.40)     ($0.40) – ($0.30)  

Oil (Bbl)

   ($2.40) – ($1.40)     ($1.70) – ($1.10)  

NGL price as a % of crude oil price

   24% – 30%     28% – 34%  

 

Unhedged Commodity Price Assumptions    Jul 19      Aug 19      Sep 19      2019E  

Natural gas (MMBtu)

   $ 2.29      $ 2.22      $ 2.20      $ 2.59  

Oil (Bbl)

   $ 57.75      $ 55.88      $ 55.88      $ 56.82  

NGL (Bbl)

   $ 15.34      $ 14.86      $ 14.83      $ 17.79  

 

(1)

Includes other revenues and margin on marketing activities for Upstream assets, only

(2)

Includes helium revenues from the VPP Interests of approximately $3.7 million

(3)

Includes helium revenues from the VPP Interests of approximately $14.6 million

(4)

Excludes share-based compensation expenses and severance expenses

(5)

Includes severance expenses of approximately $1.8 million

(6)

The Company does not provide a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis as it is unable to forecast certain items that we have defined as “Selected Items Impacting Comparability”, which items are set forth later in this press release under

 

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  the heading “Non-GAAP Financial Measures and Selected Items Impacting Comparability, without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of and the periods in which such items may be recognized. Thus, a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures could result in disclosure that could be imprecise or potentially misleading. These items could be material to and have a significant impact on the Company’s results computed in accordance with GAAP.

Hedging Update

Riviera Upstream Hedges

 

     2019     2020  

Natural Gas

       Volume    
(MMMBtu/d)
     Average Price
(per MMBtu)
        Volume    
(MMMBtu/d)
     Average Price
(per MMBtu)
 

Swaps

     141      $ 2.88       30      $ 2.82  

Collars

     20      $ 2.75 – $3.00       —        $ —    

Oil

   Volume
(Bbls/d)
     Average Price
(per Bbl)
    Volume
(Bbls/d)
     Average Price
(per Bbl)
 

Swaps

     1,000      $ 64.32       500      $ 64.63  

Natural Gas Basis Differential positions

   Volume
(MMMBtu/d)
     Average Price
(per MMBtu)
    Volume
(MMMBtu/d)
     Average Price
(per MMBtu)
 

PEPL Basis Swaps

     70      ($ 0.64     20      ($ 0.45

NWPL Basis Swaps

     10      ($ 0.61     —         $ —    

Blue Mountain Hedges

 

     2019  

Natural Gas

   Volume
(MMMBtu/d)
     Average Price
(per MMBtu)
 

Swaps

     15      $ 2.81  

Oil

   Volume
(Bbls/d)
     Average Price
(per Bbl)
 

Swaps

     98      $ 66.60  

Natural Gas Basis Differential positions

       Volume    
(MMMBtu/d)
     Average Price
(per MMBtu)
 

Southern Star Basis Swaps

     5      ($ 0.57

Enable Basis Swaps

     5      ($ 0.23

 

NGL Positions:

   2019  

Fixed price swap (Mont Belvieu ethane):

  

Hedged volume (gallons/d in thousands)

     126  

Average price ($/gallon)

   $ 0.34  

Fixed price swap (Mont Belvieu propane):

  

Hedged volume (gallons/d in thousands)

     42  

Average price ($/gallon)

   $ 0.68  

Margin spread (Mont Belvieu propane and Conway propane):

  

Hedged volume (gallons/d in thousands)

     63  

Average price ($/gallon)

   ($ 0.07

Margin spread (Mont Belvieu pentane and Conway pentane):

  

Hedged volume (gallons/d in thousands)

     63  

Average price ($/gallon)

   ($ 0.09

 

8


Earnings Call / Form 10-Q

The Company will host a conference call Thursday, August 8, 2019 at 10:00 a.m. (Central) to discuss the Company’s second quarter 2019 results and expects to file its second quarter Form 10-Q with the Securities and Exchange Commission on or around that date. There will be prepared remarks by executive management followed by a question and answer session.

Investors and analysts are invited to participate in the call by dialing (866) 416-7462, or (409) 217-8223 for international calls using Conference ID: 5655538. Interested parties may also listen over the internet at www.rivieraresourcesinc.com. A replay of the call will be available on the Company’s website.

Supplemental information can be found at the following link on our website: http://ir.rivieraresourcesinc.com/events-and-presentations

Riviera Resources Conference Attendance

Riviera Resources announces that members of senior management will be available for one-on-one meetings with investors in New Orleans at the Johnson Rice 2019 Energy Conference on September 25, 2019.

ABOUT RIVIERA RESOURCES

Riviera Resources, Inc. is an independent oil and natural gas company with a strategic focus on efficiently operating its mature low-decline assets, developing its growth-oriented assets, and returning capital to its stockholders. Riviera’s properties are located in the Hugoton Basin, East Texas, North Louisiana, the Uinta Basin and Mid-Continent regions. Riviera also owns Blue Mountain Midstream LLC, a midstream company centered in the core of the Merge play in the Anadarko Basin.

Non-GAAP Financial Measures and Selected Items Impacting Comparability

To supplement our financial information presented in accordance with GAAP, management uses additional measures known as “non-GAAP financial measures” in its evaluation of past performance and prospects for the future. The primary additional measures used by management are earnings before interest, taxes, depreciation and amortization, exploration costs, noncash gains and losses on commodity derivatives, accrued settlements on commodity derivative contracts related to current production period, share-based compensation expenses, gains and losses on asset sales, reorganization items, and asset impairments (“Adjusted EBITDAX”) and earnings before interest, taxes, depreciation and amortization, noncash gains and losses on commodity derivatives, accrued settlements on commodity derivative contracts related to current production period, share-based compensation expenses, gains and losses on asset sales, and asset impairments (“Adjusted EBITDA”). Management believes these non-GAAP financial measures provide useful information to investors because these non-GAAP measures, when viewed with the Company’s GAAP results and accompanying reconciliations, provide a more complete understanding of the Company’s performance than GAAP results alone.

Forward-Looking Statements

Statements made in this press release that are not historical facts are “forward-looking statements.” These statements are based on certain assumptions and expectations made by the Company which reflect management’s experience, estimates and perception of historical trends, current conditions, and anticipated future developments. These statements include, among others, statements regarding our 2019 guidance, planned capital expenditures, increases in oil and gas production, the number of anticipated wells to be drilled or completed after the date hereof, future cash flows and borrowings, our strategic objectives with respect to Blue Mountain Midstream, our financial position, business strategy and other plans and objectives for future operations. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or anticipated in the forward-looking statements. These include risks relating to the Company’s financial and operational performance and results, low or declining commodity prices and demand for oil, natural gas and natural gas liquids, ability to hedge future production, ability to replace reserves and efficiently develop current reserves, the capacity and utilization of midstream facilities and the regulatory environment. These and other important factors could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Please read “Risk Factors” in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.

CONTACT:

Investor Relations

(281) 840-4168

IR@RVRAresources.com

 

9


CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     June 30,
2019
    December 31,
2018
 
     (in thousands)     (in thousands)  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 80,229     $ 18,529  

Accounts receivable – trade, net

     82,218       114,489  

Derivative instruments

     18,447       10,758  

Restricted cash

     26,457       31,248  

Other current assets

     14,638       26,721  

Assets held for sale

     49,090       38,396  
  

 

 

   

 

 

 

Total current assets

     271,079       240,141  
  

 

 

   

 

 

 

Noncurrent assets:

    

Oil and natural gas properties (successful efforts method)

     692,815       756,552  

Less accumulated depletion and amortization

     (101,033     (93,507
  

 

 

   

 

 

 
     591,782       663,045  

Other property and equipment

     646,425       606,244  

Less accumulated depreciation

     (79,275     (62,368
  

 

 

   

 

 

 
     567,150       543,876  

Derivative instruments

     2,048       4,603  

Deferred income taxes

     126,646       129,091  

Other noncurrent assets

     7,389       12,078  
  

 

 

   

 

 

 
     136,083       145,772  
  

 

 

   

 

 

 

Total noncurrent assets

     1,295,015       1,352,693  
  

 

 

   

 

 

 

Total assets

   $ 1,566,094     $ 1,592,834  
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Accounts payable and accrued expenses

   $ 122,188     $ 159,228  

Derivative instruments

     5,471       4,719  

Current portion of Mayzure notes payable

     10,693       —    

Other accrued liabilities

     24,656       34,474  

Liabilities held for sale

     10,303       3,725  
  

 

 

   

 

 

 

Total current liabilities

     173,311       202,146  
  

 

 

   

 

 

 

Noncurrent liabilities:

    

Derivative instruments

     166       —    

Mayzure notes payable, net

     65,841       —    

Credit facilities

     33,500       24,500  

Asset retirement obligations

     91,480       103,814  

Other noncurrent liabilities

     9,630       —    
  

 

 

   

 

 

 

Total noncurrent liabilities

     200,617       128,314  
  

 

 

   

 

 

 

Equity:

    

Preferred Stock

     —         —    

Common Stock

     636       692  

Additional paid-in capital

     1,180,528       1,256,730  

Retained earnings

     11,002       4,952  
  

 

 

   

 

 

 

Total equity

     1,192,166       1,262,374  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,566,094     $ 1,592,834  
  

 

 

   

 

 

 

 

10


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019     2018     2019     2018  
     (in thousands, except per share amounts)  

Revenues and other:

        

Oil, natural gas and natural gas liquids sales

   $ 66,757     $ 87,004     $ 143,102     $ 223,880  

Gains (losses) on commodity derivatives

     20,249       (7,525     7,008       (22,555

Marketing revenues

     53,394       42,967       120,741       89,234  

Other revenues

     5,150       6,387       11,153       12,281  
  

 

 

   

 

 

   

 

 

   

 

 

 
     145,550       128,833       282,004       302,840  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Lease operating expenses

     23,845       24,088       47,897       71,972  

Transportation expenses

     18,053       21,213       37,203       40,307  

Marketing expenses

     41,811       40,327       95,200       82,082  

General and administrative expenses

     13,489       92,395       32,480       137,174  

Exploration costs

     969       53       2,207       1,255  

Depreciation, depletion and amortization

     23,181       21,980       44,953       50,445  

Impairment of assets held for sale

     18,390       —         18,390       —    

Taxes, other than income taxes

     2,599       7,115       8,899       15,567  

Losses (gains) on sale of assets and other, net

     9,885       (101,934     (17,380     (208,230
  

 

 

   

 

 

   

 

 

   

 

 

 
     152,174       105,237       269,849       190,572  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (expenses):

        

Interest expense, net of amounts capitalized

     (2,103     (584     (3,074     (988

Other, net

     476       538       (113     368  
  

 

 

   

 

 

   

 

 

   

 

 

 
     (1,627     (46     (3,187     (620
  

 

 

   

 

 

   

 

 

   

 

 

 

Reorganization items, net

     (424     (1,259     (472     (3,210
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations before income taxes

     (8,723     22,291       8,496       108,438  

Income tax (benefit) expense

     (2,047     13,336       2,446       64,875  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

     (6,676     8,955       6,050       43,563  

Income (loss) from discontinued operations, net of income taxes

     —         (1,758     —         34,573  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (6,676   $ 7,197     $ 6,050     $ 78,136  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per share:

        

(Loss) income from continuing operations per share – Basic

   $ (0.10   $ 0.11     $ 0.09     $ 0.58  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations per share – Diluted

   $ (0.10   $ 0.11     $ 0.09     $ 0.58  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from discontinued operations per share – Basic

   $ —       $ (0.02   $ —       $ 0.45  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from discontinued operations per share – Diluted

   $ —       $ (0.02   $ —       $ 0.45  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per share – Basic

   $ (0.10   $ 0.09     $ 0.09     $ 1.03  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per share – Diluted

   $ (0.10   $ 0.09     $ 0.09     $ 1.03  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding – Basic

     65,005       76,191       66,900       76,191  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding – Diluted

     65,089       76,191       67,079       76,191  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

11


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Six Months Ended June 30,  
     2019     2018  
     (in thousands)  

Cash flow from operating activities:

    

Net income

   $ 6,050     $ 78,136  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Income from discontinued operations

     —         (34,573

Depreciation, depletion and amortization

     44,953       50,445  

Impairment of assets held for sale

     18,390       —    

Deferred income taxes

     2,446       65,010  

Total (gains) losses on derivatives, net

     (2,047     22,555  

Cash settlements on derivatives

     (2,169     (25,037

Share-based compensation expenses

     7,885       66,374  

Gains on sale of assets and other, net

     (19,631     (209,635

Other

     4,220       2,008  

Changes in assets and liabilities:

    

Decrease in accounts receivable – trade, net

     28,361       76,465  

Decrease in other assets

     10,901       33,654  

Decrease in accounts payable and accrued expenses

     (32,119     (52,538

Decrease in other liabilities

     (8,439     (15,815
  

 

 

   

 

 

 

Net cash provided by operating activities

     58,801       57,049  
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Development of oil and natural gas properties

     (56,078     (45,938

Purchases of other property and equipment

     (48,597     (87,377

Proceeds from sale of properties and equipment and other

     95,291       369,489  
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

     (9,384     236,174  
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Net transfers to Parent

     —         (456,925

Repurchases of shares

     (77,744     —    

Proceeds from borrowings

     115,225       —    

Repayments of debt

     (26,949     —    

Debt issuance costs paid

     (3,040     —    

Distributions to unitholders

     —         (12,174

Other

     —         (294
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     7,492       (469,393
  

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

     56,909       (176,170

Cash, cash equivalents and restricted cash:

    

Beginning

     49,777       520,922  
  

 

 

   

 

 

 

Ending

   $ 106,686     $ 344,752  
  

 

 

   

 

 

 

 

12


Adjusted EBITDAX (Non-GAAP Measure)

The non-GAAP financial measure of Adjusted EBITDAX, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Therefore, this non-GAAP measure should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP. Adjusted EBITDAX should not be considered in isolation or as a substitute for GAAP.

Adjusted EBITDAX is a measure used by Company management to evaluate the Company’s operational performance and for comparisons to the Company’s industry peers. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results.

The following presents a reconciliation of net income (loss) to Adjusted EBITDAX:

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2019     2018     2019     2018  
     (in thousands)  

Net (loss) income

   $ (6,676   $ 7,197     $ 6,050     $ 78,136  

Plus (less):

        

Loss (income) from discontinued operations

     —         1,758       —         (34,573

Interest expense, net of amounts capitalized

     2,103       584       3,074       988  

Income tax (benefit) expense

     (2,047     13,336       2,446       64,875  

Depreciation, depletion and amortization

     23,181       21,980       44,953       50,445  

Exploration costs

     969       53       2,207       1,255  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDAX

     17,530       44,908       58,730       161,126  

Plus (less):

        

Noncash (gains) losses on commodity derivatives

     (14,552     6,955       (4,216     17,491  

Accrued settlements on commodity derivative contracts related to current production period (1)

     (663     935       (1,028     1,568  

Share-based compensation expenses

     3,680       58,188       9,987       75,225  

Losses (gains) on sale of assets and other, net (2)

     9,839       (100,928     (18,786     (207,260

Reorganization items, net (3)

     424       1,259       472       3,210  

Impairment of assets held for sale

     18,390       —         18,390       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDAX

   $ 34,648     $ 11,317     $ 63,549     $ 51,360  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Represent amounts related to commodity derivative contracts that settled during the respective period (contract terms had expired) but cash had not been received as of the end of the period.

(2)

Primarily represent gains or losses on the sale of assets, earnings from equity method investments and gains or losses on inventory valuation.

(3)

Represent costs and income directly associated with the predecessor’s filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code since the petition date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined.

 

13


Adjusted EBITDAX and Adjusted EBITDA (Non-GAAP Measures)

The non-GAAP financial measures of Adjusted EBITDAX and adjusted EBITDA, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Therefore, these non-GAAP measures should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP. Adjusted EBITDAX and Adjusted EBITDA should not be considered in isolation or as a substitute for GAAP.

Adjusted EBITDAX and Adjusted EBITDA are measures used by Company management to evaluate the Company’s operational performance and for comparisons to the Company’s industry peers. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results.

The following presents a reconciliation of net income (loss) to Adjusted EBITDAX and Adjusted EBITDA:

 

     Three Months Ended June 30, 2019  
     (in thousands)  
     Consolidated     Upstream     Blue
Mountain
 

Net (loss) income

   $ (6,676   $ (7,308   $ 632  

Plus (less):

      

Interest expense

     2,103       1,748       355  

Income tax benefit

     (2,047     (2,047     —    

Depreciation, depletion and amortization

     23,181       20,970       2,211  
  

 

 

   

 

 

   

 

 

 

EBITDA

     16,561       13,363       3,198  

Exploration costs

     969       969       —    
  

 

 

   

 

 

   

 

 

 

EBITDAX

     17,530       14,332       3,198  

Plus (less):

      

Noncash (gains) losses on commodity derivatives

     (14,552     (15,282     730  

Accrued settlements on commodity derivative contracts related to current production period (1)

     (663     97       (760

Share-based compensation expenses

     3,680       1,770       1,910  

Losses on sale of assets and other, net (2)

     9,839       9,030       809  

Reorganization items, net (3)

     424       424       —    

Impairment of assets held for sale

     18,390       18,390       —    
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDAX / Adjusted EBITDA

   $ 34,648     $ 28,761     $ 5,887  
  

 

 

   

 

 

   

 

 

 

 

14


     Six Months Ended June 30, 2019  
     (in thousands)  
     Consolidated     Upstream     Blue
Mountain
 

Net income (loss)

   $ 6,050     $ 8,487     $ (2,437

Plus (less):

      

Interest expense

     3,074       2,459       615  

Income tax expense

     2,446       2,446       —    

Depreciation, depletion and amortization

     44,953       40,529       4,424  
  

 

 

   

 

 

   

 

 

 

EBITDA

     56,523       53,921       2,602  

Exploration costs

     2,207       2,207       —    
  

 

 

   

 

 

   

 

 

 

EBITDAX

     58,730       56,128       2,602  

Plus (less):

      

Noncash (gains) losses on commodity derivatives

     (4,216     (8,665     4,449  

Accrued settlements on commodity derivative contracts related to current production period (1)

     (1,028     51       (1,079

Share-based compensation expenses

     9,987       4,000       5,987  

(Gains) losses on sale of assets and other, net (2)

     (18,786     (19,595     809  

Reorganization items, net (3)

     472       472       —    

Impairment of assets held for sale

     18,390       18,390       —    
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDAX / Adjusted EBITDA

   $ 63,549     $ 50,781     $ 12,768  
  

 

 

   

 

 

   

 

 

 

 

(1)

Represent amounts related to commodity derivative contracts that settled during the respective period (contract terms had expired) but cash had not been received as of the end of the period.

(2)

Primarily represent gains or losses on the sale of assets, earnings from equity method investments and gains or losses on inventory valuation.

(3)

Represent costs and income directly associated with the predecessor’s filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code since the petition date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined.

 

15