EX-99.1 2 d823441dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

NEWS RELEASE

RIVIERA RESOURCES REPORTS THIRD-QUARTER 2019 RESULTS AND ANNOUNCES SALE OF EAST TEXAS OVERTON PROPERTIES FOR $18.5 MILLION

HOUSTON, November 7, 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 third quarter 2019.

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 $295 million since August 2018

 

   

Signed definitive agreements to sell our remaining Hugoton Basin assets for a contract price of $295 million, and interests in properties located in the Overton field of East Texas for a contract price of $18.5 million

 

   

Ended the third quarter with a consolidated cash balance of ~$83 million and ~$61 million drawn on the Blue Mountain Credit Facility

 

   

Averaged approximately 242 MMcfe/d of production in the third quarter, in line with our guidance range

 

   

Invested Upstream capital of approximately $6 million, ~33% below the guidance target for the quarter

Blue Mountain highlights:

 

   

Entered into a long-term, fee-based crude oil gathering agreement with Roan Resources, Inc. (“Roan”) and construction commenced on initial facilities for the North and South systems

 

   

Roan entered into an agreement and plan of merger with Citizen Energy Operating, LLC (“Citizen”), which is a portfolio company of Warburg Pincus

 

   

Placed into service water gathering pipelines, connecting to 14 Roan pads

 

   

Closed the acquisition of Lumen Midstream Partnership, LLC, and constructed interconnect facilities, with volumes redirected to the cryo plant beginning on October 1, 2019

 

   

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

David Rottino, Riviera’s President and Chief Executive Officer, commented, “I am very pleased with Riviera’s performance in the third quarter. 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. So far this year, we have generated approximately $220 million in proceeds through opportunistic asset monetizations, and returned over $140 million of capital to shareholders through our ongoing share repurchase program and July tender offer. In addition, we will generate significant proceeds from the sale of our remaining Hugoton assets that we still expect to close in the fourth quarter of this year that can be used to return capital to shareholders. Finally, we continue to work with Tudor, Pickering, Holt & Co. to review strategic alternatives for our Blue Mountain midstream business.”

Key Financial Results (1)

 

     Three Months Ended      Nine Months Ended  
     September 30,      September 30,  

$ in millions

   2019      2018      2019      2018  

Average daily production (MMcfe/d)

     242        302        264        338  

Total oil, natural gas and NGL revenues

   $ 51      $ 90      $  194      $ 314  

(Loss) income from continuing operations

   $  (226    ($  33    $  (220    $ 10  

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

   $ —        ($  15    $ —        $ 20  

Net (loss) income

   $  (226    ($  48    $  (220    $ 30  

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

   $ 21      $ 12      $ 84      $ 63  

Net cash provided by (used in) operating activities

   $ 29      ($  85    $ 88      $  (28

Oil and natural gas capital

   $ 6      $ 7      $ 60      $ 24  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total capital (3)

   $ 42      $ 34      $ 144      $  143  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

All amounts reflect continuing operations with the exception of net (loss) income for the three months and nine months ended September 30, 2018.

(2)

Includes severance costs of approximately $2 million and success fee on capital reimbursement agreement of approximately $2 million for both the three months and nine months ended September 30, 2019, and severance costs of approximately $8 million and $26 million for the three months and nine months ended September 30, 2018, respectively.

(3)

Includes approximately $3 million of capital for the Lumen acquisition for both the three months and nine months ended September 30, 2019.

 

1


Opportunistic Asset Monetizations

Thus far in 2019, the Company has closed six transactions that in combination generated proceeds of approximately $220 million. The six transactions include the sale of the Arkoma Basin assets (closed January 2019), the monetization of a portion of the Company’s helium reserves in the Hugoton Basin utilizing a VPP structure (closed March 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), the sale of certain non-core properties located in North Louisiana (closed August 2019), and the sale of properties located in Illinois (closed September 2019).

The Company has also signed definitive agreements to sell its remaining interests in properties located in the Hugoton Basin, expected to close in the fourth quarter of 2019, and its interest in properties located in the Overton field in East Texas, that is expected to close in the first quarter of 2020. In combination, the transactions are expected to generate estimated proceeds of approximately $300 million. The Board and management will determine the use of proceeds, which consistent with past history may include a significant return of capital to shareholders.

Continuation of Share Repurchase Plan

The Company has returned over $140 million of capital to shareholders through a tender offer and share repurchases since the beginning of the year, and over $295 million since August 2018.

On July 18, 2019, the Board increased the share repurchase authorization to $150 million of the Company’s outstanding shares of common stock. Through September 30, 2019, the Company repurchased an aggregate of 8,916,526 shares at an average price of $13.55 for a total cost of approximately $121 million. In the third quarter alone the Company bought back 2,327,416 shares at an average price of $10.70 for a total cost of approximately $25 million. As of October 31, 2019, approximately $28 million was available for share repurchase under the program.

Third Quarter 2019 Activity – Upstream Assets

The Company performed in line with expectations in the third quarter with respect to its upstream assets. Production for the third quarter averaged approximately 242 MMcfe/d, in line with our guidance range. Upstream capital expenditures were approximately $6 million, 33% below the guidance target for the quarter. Adjusted G&A expenses were approximately $9 million, and operating expenses were approximately $39 million, both in-line with guidance ranges for the quarter.

Blue Mountain Business Update

In the third quarter of 2019, natural gas throughput averaged 114 MMcf/d and NGLs produced were 7,250 bpd. Average natural gas throughput for the nine months ending September 30, 2019 was 117 MMcf/d. During the third quarter, 13 wells were turned to sales on the Blue Mountain system; however, throughput volumes were impacted due to our primary customer Roan preloading or temporarily shutting-in 15 producing wells during the quarter, contributing to an average throughput loss on the system of ~11 MMcf/d since the second quarter of 2019. We anticipate these wells and volumes to return in the fourth quarter of 2019 and the first quarter of 2020.

Management expects throughput volumes from its primary customer to remain relatively flat during the remainder of 2019 as Roan recently entered into an agreement and plan of merger with Citizen. Roan has significantly curtailed operations pending the closing of that transaction, which is anticipated to take place prior to yearend. Citizen is a portfolio company of Warburg Pincus, which has over $62 billion of assets under management and substantial experience in the energy sector.

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. During the quarter, the Lumen system was connected to the Blue Mountain system, adding natural gas throughput of ~5 MMcf/d at the cryo plant, beginning on October 1, 2019.

 

2


Blue Mountain began gathering produced water on pipelines for Roan in July 2019, averaging 8,280 bpd during the third quarter of 2019. As the company progresses on the buildout of its water gathering system, it continues to transport produced water via third-party trucking services, hauling 5 million barrels of water in total, or averaging 54,165 bpd, during the third quarter of 2019. In September 2019, Blue Mountain executed a new water services agreement with a large independent producer. The agreement includes a minimum volume commitment of 5,000 bpd over a three-year term, with facilities estimated in-service in November 2019. In addition, Blue Mountain has placed in-service its first owned and operated disposal well and is constructing two more water disposal facilities, one of which is estimated to be in-service in the fourth quarter of 2019. Furthermore, Blue Mountain has acquired additional disposal capacity through a non-operated interest in another well that went in service in October 2019.

Blue Mountain entered into a crude oil gathering agreement with Roan Resources in July 2019. Construction has commenced on the initial facilities consisting of approximately 50 miles of gathering pipelines across the North and South systems, with an estimated in-service date in the first half of 2020.

During the quarter, the business was impacted by lower throughput volumes and overall lower commodity prices. Also, the business continued to be impacted by the NGL pricing differentials at Conway and Mont Belvieu, along with ineffective hedges related to these pricing differences. As a result, Blue Mountain’s third quarter adjusted EBITDA decreased by approximately $5 million compared with second quarter results. The elimination of the impact of the hedges would have added approximately $3 million to Blue Mountain’s Adjusted EBITDA. Management expects to eliminate all basis dislocation in the first quarter of 2020 when ONEOK’s Arbuckle II Pipeline is completed.

Capital expenditures for the third quarter were approximately $36 million (including approximately $3 million of acquisition capital), with the majority of capital being invested in the construction of water gathering pipelines.

Balance Sheet and Liquidity

Riviera and Blue Mountain have established separate credit facilities. As of September 30, 2019, there were no borrowings outstanding on Riviera’s revolving credit facility, and borrowing commitments of up to $90 million with available borrowing capacity of approximately $57 million, inclusive of outstanding letters of credit. At quarter end, Riviera had approximately $62 million of cash. In September 2019, Riviera amended its Credit Facility. The amendment resulted in a borrowing commitment reduction from $230 million to $90 million, primarily due to pending asset sales, including the sale of remaining Hugoton Basin properties expected to close in the fourth quarter of 2019. In addition to extending the facility’s term by one year, Riviera reduced its pricing grid by 50 basis points.

As of September 30, 2019, Blue Mountain had approximately $61 million drawn on its revolving credit facility, and borrowing commitments of up to $200 million with available borrowing capacity of approximately $126 million, including outstanding letters of credit, subject to covenant restrictions in the Blue Mountain Credit Facility, and approximately $21 million ending cash balance.

As of September 30, 2019 the Company had a consolidated ending cash balance of approximately $83 million. With $61 million drawn on Blue Mountain’s credit facility, the company had approximately $22 million in net cash.

 

3


Third Quarter Actuals

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

 

     Q3 2019
Actuals
    Q3 2019
Actuals
    Q3 2019
Actuals
 
     Upstream     Blue Mountain     Consolidated  

Net Production (MMcfe/d)

     242         242  

Natural gas (MMcf/d)

     194         194  

Oil (Bbls/d)

     2,085         2,085  

NGL (Bbls/d)

     5,979         5,979  

Other revenues, net (in thousands) (1)

   $  8,679 (2)    $  6,426 (3)    $  15,105 (4) 

Helium revenues

   $  5,120 (5)      $  5,120 (5) 

Jayhawk / Other

   $ 3,559       $ 3,559  

Blue Mountain

     $  6,426 (3)    $  6,426 (3) 

Costs (in thousands)

   $  39,050     $ 643     $ 39,693  

Lease operating expenses

   $ 18,307       $ 18,307  

Transportation expenses

   $ 16,275       $ 16,275  

Taxes, other than income taxes

   $ 4,468     $ 643     $ 5,111  

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

   $  8,612 (7)    $  3,317 (8)    $  11,929 (9) 

General and administrative- severance expenses

   $ 2,246       $ 2,246  

(in thousands)

      

Adjusted EBITDAX (Non-GAAP)

   $ 19,464     $  1,219 (10)    $  20,683 (10) 

Cash interest expense (Non-GAAP) (11)

   $ 1,008     $ 492     $ 1,500  

Oil and natural gas capital

   $ 5,803       $ 5,803  

Total capital

   $ 5,904     $  36,590     $ 42,494  

 

(1)

Includes other revenues and margin on marketing activities

(2)

Includes other revenues of approximately $5.5 million, plus marketing revenues of approximately $11.1 million, less marketing expenses of approximately $7.9 million

(3)

Includes marketing revenues of approximately $34.7 million, less adjusted marketing expenses of approximately $28.3 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 $1.4 million

(4)

Includes other revenues of approximately $5.5 million, plus marketing revenues of approximately $45.8 million, less adjusted marketing expenses of approximately $36.2 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 $1.4 million

(5)

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

Represents general and administrative expenses of approximately $11.4 million, excluding share-based compensation expenses of approximately $0.6 million, and severance expenses of approximately $2.2 million

(8)

Represents general and administrative expenses of approximately $5.5 million, excluding share-based compensation expenses of approximately $2.2 million

(9)

Represents general and administrative expenses of approximately $16.9 million, excluding share-based compensation expenses of approximately $2.8 million, and severance expenses of approximately $2.2 million

(10)

Includes success fee on capital reimbursement agreement for partial sale of NW STACK gathering infrastructure to producer of approximately $1.7 million

(11)

Excludes non cash amortization

 

4


Upstream Segment - Third Quarter Actuals versus Guidance

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

 

    

Q3 2019

Actuals

   

Q3 2019

Guidance

Net Production (MMcfe/d)

     242     233 – 255

Natural gas (MMcf/d)

     194     185 – 205

Oil (Bbls/d)

     2,085     1,900 – 2,100

NGL (Bbls/d)

     5,979     6,000 – 6,300

Other revenues, net (in thousands) (1)

   $  8,679 (2)    $ 7,000 – $ 9,000

Helium revenues

   $  5,120 (3)    $ 4,500 – $ 5,500 (3)

Jayhawk / Other

   $ 3,559     $ 2,500 – $ 3,500

Costs (in thousands)

   $  39,050     $ 36,500 – $ 41,500

Lease operating expenses

   $  18,307     $ 17,000 – $ 19,000

Transportation expenses

   $  16,275     $ 16,000 – $ 17,000

Taxes, other than income taxes

   $ 4,468     $ 3,500 – $ 5,500

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

   $  8,612 (5)    $ 8,500 – $ 9,500

General and administrative-severance expenses

   $ 2,246     $ 1,500 – $ 2,000

Targets (Mid-Point) (in thousands)

    

Adjusted EBITDAX (Non-GAAP)

   $  19,464     $ 19,000

Capital expenditures

   $ 5,904     $ 9,000

VPP Notes interest expense payments (6)

   $ 1,011     $ 1,000

VPP Notes principal payments

   $ 2,666     $ 2,700

 

(1)

Includes other revenues and margin on marketing activities

(2)

Includes other revenues of approximately $5.5 million, plus marketing revenues of approximately $11.1 million, less marketing expenses of approximately $7.9 million

(3)

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

(4)

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

(5)

For the three months ended September 30, 2019 represents general and administrative expenses of approximately $11.4 million, excluding share-based compensation expenses of approximately $0.6 million, and severance expenses of approximately $2.2 million

(6)

Excludes non cash amortization

 

5


Upstream Segment - Fourth Quarter and Full Year 2019 Guidance

The guidance below is for the Upstream assets only. Guidance estimates have been adjusted for the sale of remaining properties located in Hugoton expected to close in the fourth quarter of 2019.

 

     Q4 2019E   FY 2019E

Net Production (MMcfe/d)

   162 – 180   238 – 243

Natural gas (MMcf/d)

   133 – 147   194 – 198

Oil (Bbls/d)

   1,400 – 1,600   1,655 – 1,705

NGL (Bbls/d)

   3,500 – 3,900   5,650 – 5,750

Other revenues, net (in thousands) (1)

   $ 3,000 – $ 5,000   $ 31,000 – $ 33,000

Helium revenues

   $ 1,000 – $ 2,000 (2)   $ 16,500 – $ 17,500 (3)

Jayhawk / Other

   $ 2,000 – $ 3,000   $ 14,500 – $ 15,500

Costs (in thousands)

   $ 25,500 – $ 29,500   $ 157,500 – $ 161,500

Lease operating expenses

   $ 13,500 – $ 15,500   $ 80,000 – $ 82,000

Transportation expenses

   $ 9,000 – $ 10,000   $ 63,000 – $ 64,000

Taxes, other than income taxes

   $ 3,000 – $ 4,000   $ 14,500 – $ 15,500

Adjusted general and administrative expenses
(Non-GAAP) (4), (7)

   $ 8,500 – $ 9,500   $ 33,000 – $ 34,000

General and administrative- severance expenses

   $ 3,500 – $ 4,000   $ 6,000 – $ 6,500

Costs per Mcfe (Mid-Point)

   $ 1.74   $ 1.81

Lease operating expenses

   $ 0.92   $ 0.92

Transportation expenses

   $ 0.61   $ 0.72

Taxes, other than income taxes

   $ 0.21   $ 0.17

Targets (Mid-Point in thousands)

    

Adjusted EBITDAX (Non-GAAP) (7)

   $ 11,000 (5)   $ 81,000 (6)

Capital expenditures

   $ 4,000   $ 66,000

VPP Notes interest expense payments

   $ 500   $ 2,600

VPP Notes principal payments

   $ 1,500   $ 6,800

Weighted Average NYMEX Differentials

    

Natural gas (MMBtu)

   ($0.40) – ($ 0.20)   ($ 0.35) – ($ 0.30)

Oil (Bbl)

   ($ 2.40) – ($ 1.80)   ($ 1.70) – ($ 1.30)

NGL price as a % of crude oil price

   24% – 28%   28% – 32%

 

Unhedged Commodity Price Assumptions    Oct 19      Nov 19      Dec 19      2019E  

Natural gas (MMBtu)

   $ 2.43      $ 2.21      $ 2.46      $ 2.59  

Oil (Bbl)

   $ 54.70      $ 54.70      $ 54.78      $ 56.47  

NGL (Bbl)

   $ 14.52      $ 14.38      $ 13.76      $ 17.03  

 

(1)

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

(2)

Includes helium revenues from the VPP Interests of approximately $1.8 million

(3)

Includes helium revenues from the VPP Interests of approximately $12.8 million

(4)

Excludes share-based compensation expenses and severance expenses

(5)

Includes severance expenses of approximately $3.7 million

(6)

Includes severance expenses of approximately $6.0 million

(7)

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 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.

 

6


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 Revenue Hedges

 

     2019      2020  

Natural Gas

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

Swaps

     15      $ 2.81        —        $ —    

Oil

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

Swaps

     98      $ 66.60        49      $  55.90  

Natural Gas Basis Differential positions

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

Southern Star Basis Swaps

     5      ($ 0.57)        —        $ —    

Enable Basis Swaps

     5      ($ 0.23)        —        $ —    

NGL positions

   Volume
(gallons/d in
thousands)
     Average Price
(per gallon)
     Volume
(gallons/d in
thousands)
     Average Price
(per gallon)
 

Margin spreads

           

Mont Belvieu propane and Conway propane

     63      ($  0.07)        —        $ —    

Mont Belvieu pentane and Conway pentane

     63      ($ 0.09)        —        $ —    

Blue Mountain Cost Hedges

 

     2019      2020  

NGL positions

   Volume
(gallons/d in
thousands)
     Average Price
(per gallon)
     Volume
(gallons/d in
thousands)
     Average Price
(per gallon)
 

Fixed price swaps

           

Mont Belvieu ethane

     126      $  0.34        —        $ —    

Mont Belvieu propane

     42      $ 0.68        —        $ —    

 

7


Earnings Call / Form 10-Q

The Company will host a conference call Thursday, November 7, 2019 at 10:00 a.m. (Central) to discuss the Company’s third quarter 2019 results and expects to file its third 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: 6994895. 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

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 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 and other, 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 other, 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

 

8


CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     September 30,
2019
    December 31,
2018
 
     (in thousands, except share amounts)  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 83,161     $ 18,529  

Accounts receivable – trade, net

     67,156       114,489  

Derivative instruments

     14,132       10,758  

Restricted cash

     45,757       31,248  

Other current assets

     12,699       26,721  

Assets held for sale

     419,290       38,396  
  

 

 

   

 

 

 

Total current assets

     642,195       240,141  
  

 

 

   

 

 

 

Noncurrent assets:

    

Oil and natural gas properties (successful efforts method)

     316,973       756,552  

Less accumulated depletion and amortization

     (64,796     (93,507
  

 

 

   

 

 

 
     252,177       663,045  

Other property and equipment

     461,847       606,244  

Less accumulated depreciation

     (54,991     (62,368
  

 

 

   

 

 

 
     406,856       543,876  

Derivative instruments

     1,243       4,603  

Deferred income taxes

     —         129,091  

Other noncurrent assets

     9,376       12,078  
  

 

 

   

 

 

 
     10,619       145,772  
  

 

 

   

 

 

 

Total noncurrent assets

     669,652       1,352,693  
  

 

 

   

 

 

 

Total assets

   $ 1,311,847     $ 1,592,834  
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current liabilities:

    

Accounts payable and accrued expenses

   $ 104,726     $ 159,228  

Derivative instruments

     4,087       4,719  

Other accrued liabilities

     48,122       34,474  

Liabilities held for sale

     127,023       3,725  
  

 

 

   

 

 

 

Total current liabilities

     283,958       202,146  
  

 

 

   

 

 

 

Noncurrent liabilities:

    

Credit facilities

     61,100       24,500  

Asset retirement obligations

     52,143       103,814  

Other noncurrent liabilities

     13,210       —    
  

 

 

   

 

 

 

Total noncurrent liabilities

     126,453       128,314  
  

 

 

   

 

 

 

Commitments and contingencies (Note 10)

    

Equity:

    

Preferred Stock ($0.01 par value, 30,000,000 shares authorized; no shares issued at September 30, 2019, or December 31, 2018)

     —         —    

Common Stock ($0.01 par value, 270,000,000 shares authorized; 58,632,328 shares and 69,197,284 shares issued at September 30, 2019, and December 31, 2018, respectively)

     586       692  

Additional paid-in capital

     1,115,483       1,256,730  

Retained earnings

     (214,633     4,952  
  

 

 

   

 

 

 

Total equity

     901,436       1,262,374  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 1,311,847     $ 1,592,834  
  

 

 

   

 

 

 

 

9


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2019     2018     2019     2018  
     (in thousands, except per share amounts)  

Revenues and other:

        

Oil, natural gas and natural gas liquids sales

   $ 51,029     $ 89,653     $ 194,131     $ 313,533  

Gains (losses) on commodity derivatives

     5,665       (3,175     12,673       (25,730

Marketing revenues

     45,828       67,246       166,569       156,480  

Other revenues

     5,532       5,877       16,685       18,158  
  

 

 

   

 

 

   

 

 

   

 

 

 
     108,054       159,601       390,058       462,441  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Lease operating expenses

     18,307       22,930       66,204       94,902  

Transportation expenses

     16,275       22,304       53,478       62,611  

Marketing expenses

     37,688       63,149       132,888       145,231  

General and administrative expenses

     16,954       90,931       49,434       228,105  

Exploration costs

     1,947       2,487       4,154       3,742  

Depreciation, depletion and amortization

     20,060       21,515       65,013       71,960  

Impairment of assets held for sale

     95,080       —         113,470       —    

Taxes, other than income taxes

     5,111       7,162       14,010       22,729  

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

     (7,587     221       (24,967     (208,009
  

 

 

   

 

 

   

 

 

   

 

 

 
     203,835       230,699       473,684       421,271  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income and (expenses):

        

Interest expense, net of amounts capitalized

     (2,329     (594     (5,403     (1,582

Other, net

     (595     105       (708     473  
  

 

 

   

 

 

   

 

 

   

 

 

 
     (2,924     (489     (6,111     (1,109
  

 

 

   

 

 

   

 

 

   

 

 

 

Reorganization items, net

     (284     (1,277     (756     (4,487
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations before income taxes

     (98,989     (72,864     (90,493     35,574  

Income tax expense (benefit)

     126,646       (39,628     129,092       25,247  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations

     (225,635     (33,236     (219,585     10,327  

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

     —         (14,899     —         19,674  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (225,635   $ (48,135   $ (219,585   $ 30,001  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per share:

        

(Loss) income from continuing operations per share – Basic

   $ (3.76   $ (0.43   $ (3.40   $ 0.13  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from continuing operations per share – Diluted

   $ (3.76   $ (0.43   $ (3.40   $ 0.13  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from discontinued operations per share – Basic

   $ —       $ (0.20   $ —       $ 0.26  
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income from discontinued operations per share – Diluted

   $ —       $ (0.20   $ —       $ 0.26  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per share – Basic

   $ (3.76   $ (0.63   $ (3.40   $ 0.39  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income per share – Diluted

   $ (3.76   $ (0.63   $ (3.40   $ 0.39  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding – Basic

     60,004       76,135       64,576       76,171  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding – Diluted

     60,004       76,135       64,576       76,518  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

10


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine Months Ended
September 30,
 
     2019     2018  
     (in thousands)  

Cash flow from operating activities:

    

Net (loss) income

   $ (219,585   $ 30,001  

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

    

Income from discontinued operations

     —         (19,674

Depreciation, depletion and amortization

     65,013       71,960  

Impairment of assets held for sale

     113,470       —    

Deferred income taxes

     129,092       25,382  

Total (gains) losses on derivatives, net

     (6,386     25,730  

Cash settlements on derivatives

     5,740       (25,341

Share-based compensation expenses

     10,624       16,105  

Gains on sale of assets and other, net

     (27,366     (204,644

Other

     8,897       1,336  

Changes in assets and liabilities:

    

Decrease in accounts receivable – trade, net

     37,305       57,674  

Decrease in other assets

     5,367       61,309  

Decrease in accounts payable and accrued expenses

     (29,997     (51,608

Decrease in other liabilities

     (4,331     (15,750
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     87,843       (27,520
  

 

 

   

 

 

 

Cash flow from investing activities:

    

Acquisition of property, plant and equipment

     (3,380     —    

Development of oil and natural gas properties

     (67,864     (56,116

Purchases of other property and equipment

     (82,232     (116,237

Proceeds from sale of properties and equipment and other

     177,907       367,086  
  

 

 

   

 

 

 

Net cash provided by investing activities — continuing operations

     24,431       194,733  

Net cash provided by investing activities — discontinued operations

     —         7,000  
  

 

 

   

 

 

 

Net cash provided by investing activities

     24,431       201,733  
  

 

 

   

 

 

 

Cash flow from financing activities:

    

Net transfers to Parent

     —         (481,449

Repurchases of shares

     (143,097     (7,576

Proceeds from borrowings

     142,825       —    

Repayments of debt

     (29,615     —    

Debt issuance costs paid

     (3,246     (2,505

Distributions to unitholders

     —         (18,717

Other

     —         (841
  

 

 

   

 

 

 

Net cash used in financing activities

     (33,133     (511,088
  

 

 

   

 

 

 

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

     79,141       (336,875

Cash, cash equivalents and restricted cash:

    

Beginning

     49,777       520,922  
  

 

 

   

 

 

 

Ending

   $ 128,918     $ 184,047  
  

 

 

   

 

 

 

 

11


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
September 30,
     Nine Months Ended
September 30,
 
     2019      2018      2019      2018  
     (in thousands)  

Net (loss) income

   $ (225,635    $ (48,135    $ (219,585    $ 30,001  

Plus (less):

           

Loss (income) from discontinued operations

     —          14,899        —          (19,674

Interest expense, net of amounts capitalized

     2,329        594        5,403        1,582  

Income tax expense (benefit)

     126,646        (39,628      129,092        25,247  

Depreciation, depletion and amortization

     20,060        21,515        65,013        71,960  

Exploration costs

     1,947        2,487        4,154        3,742  
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDAX

     (74,653      (48,268      (15,923      112,858  

Plus (less):

           

Noncash losses (gains) on commodity derivatives

     3,738        2,869        (478      20,360  

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

     (154      (124      (1,182      1,444  

Share-based compensation expenses

     2,832        56,063        12,819        131,288  

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

     (6,444      23        (25,230      (207,237

Reorganization items, net (3)

     284        1,277        756        4,487  

Impairment of assets held for sale

     95,080        —          113,470        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDAX (4)

   $ 20,683      $ 11,840      $ 84,232      $ 63,200  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(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, gains or losses on inventory valuation, and write-off of deferred financing fees.

(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.

(4)

Includes success fee on capital reimbursement agreement of approximately $2 million for both the three months and nine months ended September 30, 2019.

 

12


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 September 30, 2019  
     (in thousands)  
     Consolidated      Upstream      Blue
Mountain
 

Net loss

   $ (225,635    $ (222,365    $ (3,270

Plus (less):

        

Interest expense

     2,329        1,711        618  

Income tax expense

     126,646        126,646        —    

Depreciation, depletion and amortization

     20,060        17,593        2,467  
  

 

 

    

 

 

    

 

 

 

EBITDA

     (76,600      (76,415      (185

Exploration costs

     1,947        1,947        —    
  

 

 

    

 

 

    

 

 

 

EBITDAX

     (74,653      (74,468      (185

Plus (less):

        

Noncash losses (gains) on commodity derivatives

     3,738        4,629        (891

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

     (154      (68      (86

Share-based compensation expenses

     2,832        623        2,209  

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

     (6,444      (6,616      172  

Reorganization items, net (3)

     284        284        —    

Impairment of assets held for sale

     95,080        95,080        —    
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDAX / Adjusted EBITDA (4)

   $ 20,683      $ 19,464      $ 1,219  
  

 

 

    

 

 

    

 

 

 

 

13


     Nine Months Ended September 30, 2019  
     (in thousands)  
     Consolidated      Upstream      Blue
Mountain
 

Net loss

   $ (219,585    $ (213,878    $ (5,707

Plus (less):

        

Interest expense

     5,403        4,170        1,233  

Income tax expense

     129,092        129,092        —    

Depreciation, depletion and amortization

     65,013        58,122        6,891  
  

 

 

    

 

 

    

 

 

 

EBITDA

     (20,077      (22,494      2,417  

Exploration costs

     4,154        4,154        —    
  

 

 

    

 

 

    

 

 

 

EBITDAX

     (15,923      (18,340      2,417  

Plus (less):

        

Noncash (gains) losses on commodity derivatives

     (478      (4,036      3,558  

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

     (1,182      (17      (1,165

Share-based compensation expenses

     12,819        4,623        8,196  

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

     (25,230      (26,211      981  

Reorganization items, net (3)

     756        756        —    

Impairment of assets held for sale

     113,470        113,470        —    
  

 

 

    

 

 

    

 

 

 

Adjusted EBITDAX / Adjusted EBITDA (4)

   $ 84,232      $ 70,245      $ 13,987  
  

 

 

    

 

 

    

 

 

 

 

(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, gains or losses on inventory valuation, and write-off of deferred financing fees.

(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.

(4)

Consolidated and Blue Mountain include success fee on capital reimbursement agreement of approximately $2 million for both the three months and nine months ended September 30, 2019.

 

14