Investors

Riviera Resources Reports Fourth-Quarter and Year End 2018 Results; Provides 2019 Guidance

February 28, 2019 at 6:45 AM EST

HOUSTON, Feb. 28, 2019 (GLOBE NEWSWIRE) -- Riviera Resources, Inc. (OTCQX: RVRA) (“Riviera” or the “Company”) announces financial and operating results for the fourth quarter and full year 2018 and provides a strategic update as well as guidance for 2019.

The Company highlights the following accomplishments:

  • Executed the spin-off from LINN Energy, Inc. on August 7, 2018
  • Returned more than $155 million of capital to shareholders through share repurchases
  • Sold Arkoma Basin assets for proceeds of approximately $65 million, a premium to PDP PV-10 value
  • Outperformed adjusted EBITDAX guidance for the last two quarters
  • Fourth quarter 2018 average production exceeded midpoint of guidance
  • Capital investment over the last two quarters of approximately $61 million was 35% lower than guidance
  • Blue Mountain commissioned its Cryo I plant to its design capacity of 250 MMcf/d
  • Blue Mountain signed an agreement to provide water gathering services to Roan Resources beginning in 2019

The Company’s strategic initiatives for 2019 include:

  • Focusing upstream capital on high-return projects that maintain production and delineate the NW STACK while still generating significant free cash flow
  • Continuing to use cash on hand, free cash flow, and opportunistic asset monetizations to return capital to our shareholders
  • Continuing to grow and diversify Blue Mountain’s midstream business to best position it towards a strategic transaction

David Rottino, Riviera’s President and Chief Executive Officer, commented, “I am very pleased with Riviera’s progress since our spin last August. In the fourth quarter, our operational performance was excellent as we generated more cash flow than forecasted through higher production, lower G&A costs and lower capital spending.” Rottino continued, “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. In the fourth quarter, we announced the sale of our Arkoma basin assets, which closed in January 2019, we completed an upsized tender offer returning over $133 million to shareholders, and we continued to execute repurchases through our ongoing share repurchase program. Finally, we intend to grow our exciting Blue Mountain midstream business to best position it towards a strategic transaction.”

 
Key Financial Results (1)
 
  Fourth Quarter Full Year
$ in millions, except per unit amounts 2018 2017 2018 2017(2)
Average daily production (MMcfe/d) 299 505 328 637
Total oil, natural gas and NGL revenues $ 107 $ 180 $ 420 $ 898
Income from continuing operations $ 11 $ 79 $ 21 $ 2,932
Income from discontinued operations, net of income taxes $ - $ 6 $ 20 $ 90
Net income $ 11 $ 85 $ 41 $ 3,022
Adjusted EBITDAX (a non-GAAP financial measure)(3) $ 44 $ 75 $ 107 $ 394
Net cash provided by (used in) operating activities $ 21 $ 76 ($ 7) $ 215
Oil and natural gas capital $ 12 $ 31 $ 36 $ 239
Total capital $ 27 $ 61 $ 170 $ 344
(1) All amounts reflect continuing operations with the exception of net income.
(2) All amounts reflect the combined results of the ten months ended December 31, 2017 (successor) and the two months ended February 28, 2017 (predecessor).
(3) Excludes Adjusted EBITDAX from discontinued operations of approximately $164,000 and $30 million for the three months and the year ended December 31, 2017, respectively. Includes severance costs and spin-off related costs of approximately $1 million and $39 million, for the three months and the year ended December 31, 2018, respectively.
 

Strategic Plan to Transform Assets to Drive Shareholder Value
The Board and management continue to believe the Company is trading at a significant discount to its sum-of-the-parts net asset value. To enhance shareholder value, the Company plans to increase the scale, scope and reach of Blue Mountain while preparing Blue Mountain for its eventual separation as a standalone entity or for another transaction that maximizes shareholder value. In addition, based on the Company’s successful track record of monetizing assets, the Company will continue to return capital to shareholders through further upstream asset monetizations.

Continuation of Share Repurchase Plan
On August 16, 2018, the Company’s Board of Directors authorized the repurchase of up to $100 million of the Company’s outstanding shares of common stock. Under this program, the Company repurchased an aggregate of 1,167,767 shares at an average price of $18.46 for a total cost of approximately $22 million, and approximately $78 million was available for share repurchase as of February 22, 2019.

Fourth Quarter 2018 Activity – Upstream Assets
Riviera’s production for the fourth quarter averaged approximately 299 MMcfe/d, 4% above the mid-point of our guidance range. The outperformance in production was mainly due to higher production from non-operated drilling in the NW Stack, production enhancing projects in East Texas and North Louisiana, and lower downtime across our mature asset base. The production outperformance, low annual decline of approximately 10%, and consistent operating expenses, all illustrate the predictability of our upstream assets. Additionally, we believe the development opportunities throughout our NW STACK, East Texas, and North Louisiana acreage positions provide significant upside.

With respect to costs, the Company had strong results in the fourth quarter. Capital expenditures were approximately $12 million compared to guidance of $29 million. Adjusted G&A expenses were approximately $15 million, 16% below the mid-point of our guidance range for the quarter. Operating expenses for the fourth quarter were in-line with guidance at approximately $53 million

Initiation of Northwest STACK / North Louisiana Operated Drilling Program
In December 2018, the Company initiated an operated drilling program in the NW STACK. To date, Riviera has finished drilling three wells and is currently drilling its fourth well. The Company has completed two wells and is encouraged by the early flow-back data.

The Company also began drilling in North Louisiana in late December 2018. It is currently drilling the second well of a two-well pad targeting the Upper Red formation. This pad is scheduled to be completed in March with first production expected in April 2019. At current prices, the Company expects to generate over 100% IRR on these wells.

Blue Mountain Business Update
The fourth quarter of 2018 ended a transformative year for Blue Mountain. During the year, Blue Mountain constructed and placed in-service a cryogenic processing facility at its full 250 MMcf/d capacity and made significant progress toward setting up its organization and systems consistent with a standalone operating entity.

For the fourth quarter 2018, Blue Mountain’s operating margin, also referred to as other revenues, net, came in at the top end of its guidance range. Fourth quarter 2018 average throughput was within the guidance range. On average, natural gas throughput was 132 MMcf/d and NGLs produced were 8,700 bpd, compared with 35 MMcf/d and 1,080 bpd for the fourth quarter of 2017.

During the fourth quarter of 2018, Blue Mountain continued to make progress on its strategic objective to diversify its service offerings through scalable growth platforms in Central Oklahoma. Recently, Blue Mountain finalized an agreement with Roan Resources to provide water management services beginning in the second quarter of 2019. Also, Blue Mountain is in active discussions to develop oil gathering infrastructure to capture additional midstream value in the Merge play.

In addition, Blue Mountain is currently developing opportunities to further extend its natural gas and water capabilities in the region and is in discussions with third-party producers to meet their needs in the expanding Merge/SCOOP/STACK plays. These expansion opportunities will allow Blue Mountain to grow its asset base and further diversify its producer counterparties, while leveraging existing infrastructure, capabilities and expertise.

Balance Sheet and Liquidity
Riviera and Blue Mountain have established separate credit facilities. As of December 31, 2018, Riviera had $20 million drawn on its revolving credit facility, and borrowing commitments of up to $425 million with available borrowing capacity of approximately $371 million, inclusive of outstanding letters of credit. As of December 31, 2018, Blue Mountain had $4.5 million drawn on its revolving credit facility, borrowing commitments of approximately $76 million, and available borrowing capacity of $72 million. The Company had a fourth quarter consolidated ending cash balance of approximately $19 million.

In January 2019, the Company closed on the sale of its Arkoma basin assets. The proceeds were used to pay off the $20 million drawn on Riviera’s credit facility. The sale resulted in a reduction of the borrowing commitment to $385 million. As of January 31, 2019, Riviera had no borrowings under its credit facility, Blue Mountain had $11.5 million drawn on its revolving credit facility, and the Company had a consolidated ending cash balance of approximately $80 million.

Proved Reserves Update
Proved reserves at December 31, 2018 were approximately 1,618 Bcfe, of which approximately 78% were natural gas, 21% were natural gas liquids and 1% were oil. Approximately 96% were classified as proved developed, with a total standardized measure of discounted future net cash flows of approximately $747 million. PV-10 (a non-GAAP measure) was approximately $1.02 billion with exclusion of income taxes and the inclusion of helium. See Schedule 2 below for a reconciliation of PV-10.

 
Proved Reserves Table
  Total Continuing
Operations (Bcfe)
 Proved reserves at December 31, 2017 1,968  
 Revisions of previous estimates – Price 87  
 Revisions of previous estimates – Performance (80)  
 Sales of minerals in place (239)  
 Extensions and discoveries 2  
 Production (120)  
 Proved reserves at December 31, 2018 1,618  


Fourth Quarter Actuals versus Guidance
 
  Q4 2018
Actuals
Q4 2018
Guidance
     
Net Production (MMcfe/d) 299 273 – 303
Natural gas (MMcf/d) 241 220 – 245
Oil (Bbls/d) 1,373 1,350 – 1,500
NGL (Bbls/d) 8,318 7,500 – 8,100
     
Other revenues, net (in thousands) (1) $ 20,422(2) $ 15,000 - $ 21,000
Blue Mountain $11,122 $ 8,000 - $ 12,000
Other $9,300 $ 7,000 - $ 9,000
     
Costs (in thousands) $ 53,147 $ 49,000 – $ 55,000
Lease operating expenses $25,195 $ 23,000 – $ 25,000
Transportation expenses $20,951 $ 20,000 – $ 22,000
Taxes, other than income taxes $7,001 $ 6,000 – $ 8,000
     
Adjusted general and administrative expenses (3) $ 15,488(4) $ 17,000 – $ 20,000
Upstream adjusted general and administrative expenses (3) $11,786  
Blue Mountain adjusted general and administrative expenses (3) $3,702  
     
General and administrative- severance expenses $1,158 $ 1,000 – $ 2,000
     
Targets (Mid-Point) (in thousands)    
Adjusted EBITDAX $ 43,658(5) $ 30,000(6)
Interest expense (7) $ 179 $ 150
Oil and natural gas capital $ 11,594 $ 29,000
Blue Mountain capital $ 12,306 $ 13,000
Total capital $ 27,358 $ 44,000
 
(1) Includes other revenues and margin on marketing activities
(2) Includes other revenues of approximately $5.7 million, plus marketing revenues of approximately $88.6 million, less marketing expenses of approximately $73.9 million for the three months ended December 31, 2018. Excludes gains and losses on derivative instruments included in marketing expenses
(3) 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
(4) For the three months ended December 31, 2018 represents general and administrative expenses of approximately $17.2 million, excluding share-based compensation expenses of approximately $0.5 million and severance expenses of approximately $1.2 million
(5) Includes a reduction to Adjusted EBITDAX for certain non-recurring estimated G&A expenses, including severance expenses of $1.4 million
(6) Includes a reduction to Adjusted EBITDAX for certain non-recurring estimated G&A expenses, including severance expenses of $1.5 million, land diligence costs of $1 million
(7) Excludes non cash amortization
 

Upstream Segment - First Quarter and Full Year 2019 Guidance

The guidance below is for the upstream assets only. The Company anticipates providing 2019 guidance estimates for Blue Mountain by early second quarter.

The 2019 upstream guidance reflects the Arkoma Basin divestiture that closed in January, 2019. In 2019, the Company expects to invest approximately $66 million of capital on its upstream assets. Approximately 80% of upstream capital will be devoted to drilling expected high return wells in the NW STACK and North Louisiana to keep production relatively flat throughout the year while still generating significant free cash flow.

     
  Q1 2019E FY 2019E
     
Net Production (MMcfe/d) 252 – 281 252 – 282
Natural gas (MMcf/d) 205 – 230 205 – 230
Oil (Bbls/d) 1,150 – 1,300 1,550 – 1,750
NGL (Bbls/d) 6,600 – 7,300 6,300 – 6,900
     
Other revenues, net (in thousands) (1) $ 8,000 - $ 10,000 $ 32,000 – $ 35,000
     
Costs (in thousands) $ 46,000 – $ 52,000 $ 182,000 – $ 202,000
Lease operating expenses $ 23,000 – $ 25,000 $ 88,000 – $ 97,000
Transportation expenses $ 18,000 – $ 20,000 $ 71,000 – $ 79,000
Taxes, other than income taxes $ 5,000 – $ 7,000 $ 23,000 – $ 26,000
     
Adjusted general and administrative expenses (2) $ 9,000 – $ 10,000 $ 30,000 – $ 35,000
     
Costs per Mcfe (Mid-Point) $ 2.02 $ 1.97
Lease operating expenses $ 0.99 $ 0.95
Transportation expenses $ 0.78 $ 0.77
Taxes, other than income taxes $ 0.25 $ 0.25
     
Targets (Mid-Point) (in thousands)    
Adjusted EBITDAX $ 21,000 $ 96,000
Oil and natural gas capital $ 38,000 $ 61,000
Total capital $ 40,000 $ 66,000
     
Weighted Average NYMEX Differentials    
Natural gas (MMBtu) ($ 0.35) – ($ 0.25) ($ 0.50) – ($ 0.20)
Oil (Bbl) ($ 2.50) – ($ 2.00) ($ 3.00) – ($ 1.75)
NGL price as a % of crude oil price 40% – 45% 40% – 45%


Unhedged Commodity Price Assumptions Jan 19 Feb 19 Mar 19 2019E
Natural gas (MMBtu) $3.64 $2.95 $2.63 $2.86
Oil (Bbl) $51.55 $55.59 $55.59 $56.80
NGL (Bbl) $23.33 $24.89 $22.20 $23.85
 
(1) Includes other revenues and margin on marketing activities for Upstream assets, only
(2) Excludes share-based compensation expenses


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)
MichCon Basis Swaps 20 ($ 0.19) 10 ($ 0.19)
NWPL Basis Swaps 10 ($ 0.61) - $ -


Blue Mountain Hedges    
  Q1 2019 Q2 – Q4 2019
Natural Gas Volume
(MMMBtu/d)
Average Price
(per MMBtu)
Volume
(MMMBtu/d)
Average Price
(per MMBtu)
Swaps 10 $ 4.19 15 $ 2.81
Oil Volume
(Bbls/d)
Average Price
(per Bbl)
Volume
(Bbls/d)
Average Price
(per Bbl)
Swaps 99 $ 66.60 99 $ 66.60
Natural Gas Basis Differential positions Volume
(MMMBtu/d)
Average Price
(per MMBtu)
Volume
(MMMBtu/d)
Average Price
(per MMBtu)
Southern Star TX OK KS 5 ($ 0.565) 5 ($ 0.565)
Enable Basis Swaps 5 ($ 0.23) 5 ($ 0.23)


NGL Positions: Jan 19 Feb 19 Mar 19 Q2 – Q4 2019
Fixed price swap (Mont Belvieu ethane):        
Hedged volume (gallons/d in thousands) 84 126 126 126
Average price ($/gallon) $ 0.34 $ 0.34 $ 0.34 $ 0.34
Fixed price swap (Mont Belvieu propane):        
Hedged volume (gallons/d in thousands) 42 42 42 42
Average price ($/gallon) $ 0.68 $ 0.68 $ 0.68 $ 0.68
Margin spread (Mont Belvieu propane and Conway propane):        
Hedged volume (gallons/d in thousands) 63 63 63 63
Average price ($/gallon) ($ 0.07) ($ 0.07) ($ 0.07) ($ 0.07)
Margin spread (Mont Belvieu pentane and Conway pentane):        
Hedged volume (gallons/d in thousands)     42 42
Average price ($/gallon)     ($ 0.095) ($ 0.095)
         

Earnings Call / Form 10‑K
The Company will host a conference call Thursday, February 28, 2019 at 10 a.m. (Central) to discuss the Company’s fourth quarter and full year 2018 results and expects to file its Annual Report on Form 10-K for the year ended December 31, 2018 with the U.S. 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: 8616887. 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 the Hugoton Basin, East Texas, North Louisiana, Michigan/Illinois, 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.

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

 
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
  December 31,
2018
  December 31,
2017
       
  (in thousands)
ASSETS      
Current assets:      
Cash and cash equivalents $ 18,529     $ 464,477  
Accounts receivable – trade, net 114,489     140,485  
Derivative instruments 10,758     9,629  
Restricted cash 31,248     56,445  
Other current assets 26,721     76,683  
Assets held for sale 38,396     106,963  
Total current assets 240,141     854,682  
       
Noncurrent assets:      
Oil and natural gas properties (successful efforts method) 756,552     950,083  
Less accumulated depletion and amortization (93,507 )   (49,619 )
  663,045     900,464  
       
Other property and equipment 606,244     480,729  
Less accumulated depreciation (62,368 )   (28,658 )
  543,876     452,071  
       
Derivative instruments 4,603     469  
Deferred income taxes 129,091     188,538  
Other noncurrent assets 12,078     14,256  
Noncurrent assets of discontinued operations     457,645  
  145,772     660,908  
Total noncurrent assets 1,352,693     2,013,443  
Total assets $ 1,592,834     $ 2,868,125  
       
LIABILITIES AND EQUITY      
Current liabilities:      
Accounts payable and accrued expenses $ 159,228     $ 253,975  
Derivative instruments 4,719     10,103  
Other accrued liabilities 34,474     58,130  
Liabilities held for sale 3,725     43,302  
Total current liabilities 202,146     365,510  
       
Noncurrent liabilities:      
Long-term debt 24,500      
Derivative instruments     2,849  
Asset retirement obligations and other noncurrent liabilities 103,814     160,720  
Total noncurrent liabilities 128,314     163,569  
       
Equity:      
Common stock 692      
Additional paid-in capital 1,256,730      
Retained earnings 4,952      
Net parent company investment     2,339,046  
Total equity 1,262,374     2,339,046  
Total liabilities and equity $ 1,592,834     $ 2,868,125  


CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
 
  Successor     Predecessor
  Year Ended
December
31, 2018
  Ten Months
Ended
December
31, 2017
    Two Months
Ended
February 28,
2017
  Year Ended
December 31,
2016
(in thousands, except per share amounts)                                
Revenues and other:                                
Oil, natural gas and natural gas liquids sales $ 420,102     $ 709,363       $ 188,885     $ 874,161  
Gains (losses) on oil and natural gas derivatives   (23,404 )     13,533         92,691       (164,330 )
Marketing revenues   245,081       82,943         6,636       36,505  
Other revenues   23,880       20,839         9,915       93,308  
    665,659       826,678         298,127       839,644  
Expenses:                                
Lease operating expenses   120,097       208,446         49,665       296,891  
Transportation expenses   83,562       113,128         25,972       161,574  
Marketing expenses   220,971       69,008         4,820       29,736  
General and administrative expenses   245,291       117,347         71,745       237,841  
Exploration costs   5,178       3,137         93       4,080  
Depreciation, depletion and amortization   94,958       133,711         47,155       342,614  
Impairment of long-lived assets   15,697                     165,044  
Taxes, other than income taxes   29,730       47,553         14,877       67,644  
(Gains) losses on sale of assets and other, net   (208,598 )     (623,583 )       672       15,558  
    606,886       68,747         214,999       1,320,982  
Other income and (expenses):                                
Interest expense, net of amounts capitalized   (2,417 )     (12,380 )       (16,725 )     (184,870 )
Other, net   (677 )     (6,233 )       (149 )     (2,345 )
    (3,094 )     (18,613 )       (16,874 )     (187,215 )
Reorganization items, net   (5,159 )     (8,533 )       2,521,137       336,120  
Income (loss) from continuing operations before income taxes   50,520       730,785         2,587,391       (332,433 )
Income tax expense (benefit)   29,587       385,654         (166 )     11,300  
Income (loss) from continuing operations   20,933       345,131         2,587,557       (343,733 )
Income (loss) from discontinued operations, net of income taxes   19,674       90,064         (548 )     (18,354 )
Net income (loss) $ 40,607     $ 435,195       $ 2,587,009     $ (362,087 )
Income (loss) per share                                
Income (loss) from continuing operations per share – Basic $ 0.28     $ 4.53       $ 33.96     $ (4.51 )
Income (loss) from continuing operations per share – Diluted $ 0.28     $ 4.53       $ 33.96     $ (4.51 )
Income (loss) from discontinued operations per share – Basic $ 0.26     $ 1.18       $ (0.01 )   $ (0.24 )
Income (loss) from discontinued operations per share – Diluted $ 0.26     $ 1.18       $ (0.01 )   $ (0.24 )
Net income (loss) per share – Basic $ 0.54     $ 5.71       $ 33.95     $ (4.75 )
Net income (loss) per share – Diluted $ 0.54     $ 5.71       $ 33.95     $ (4.75 )
Weighted average shares outstanding – Basic   74,935       76,191         76,191       76,191  
Weighted average shares outstanding – Diluted   75,360       76,191         76,191       76,191  


CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Unaudited)
 
  Successor     Predecessor
  Year Ended
December 31,
2018
  Ten Months
Ended
December 31,
2017
    Two Months
Ended
February 28,
2017
  Year Ended
December 31,
2016
(in thousands)                
Cash flow from operating activities:                
Net income (loss) $ 40,607     $ 435,195       $ 2,587,009     $ (362,087 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
(Income) loss from discontinued operations   (19,674 )     (90,064 )       548       18,354  
Depreciation, depletion and amortization   94,958       133,711         47,155       342,614  
Impairment of long-lived assets   15,697                     165,044  
Deferred income taxes   29,701       378,512         (166 )     11,367  
Total (gains) losses on derivatives, net   25,243       (13,533 )       (92,691 )     164,330  
Cash settlements on derivatives   (38,739 )     26,793         (11,572 )     860,778  
Share-based compensation expenses   16,605       41,285         50,255       44,218  
Amortization and write-off of deferred financing fees   1,909       3,711         1,338       13,356  
(Gains) losses on sale of assets and other, net   (204,534 )     (656,198 )       1,069       13,007  
Reorganization items, net                 (2,456,074 )     (390,367 )
Changes in assets and liabilities:                
(Increase) decrease in accounts receivable – trade, net   26,956       41,094         (7,216 )     (71,059 )
(Increase) decrease in other assets   64,033       (265 )       528       (15,360 )
Increase (decrease) in accounts payable and accrued expenses   (46,792 )     (92,664 )       20,949       38,504  
Increase (decrease) in other liabilities   (12,564 )     7,253         2,801       (662 )
Net cash provided by (used in) operating activities – continuing operations   (6,594 )     214,830         143,933       832,037  
Net cash provided by operating activities – discontinued operations         16,191         8,781       43,269  
Net cash provided by (used in) operating activities   (6,594 )     231,021         152,714       875,306  
Cash flow from investing activities:                
Development of oil and natural gas properties   (64,756 )     (171,721 )       (50,597 )     (172,298 )
Purchases of other property and equipment   (142,373 )     (88,595 )       (7,409 )     (43,559 )
Proceeds from sale of properties and equipment and other   368,291       1,172,025         (166 )     (4,690 )
Net cash provided by (used in) investing activities – continuing operations   161,162       911,709         (58,172 )     (220,547 )
Net cash provided by (used in) investing activities – discontinued operations   7,000       345,643         (584 )     (9,891 )
Net cash provided by (used in) investing activities   168,162       1,257,352         (58,756 )     (230,438 )
                 
Cash flow from financing activities:                
Net transfers (to) from parent   (481,449 )     (202,533 )       636,000       (213,844 )
Repurchases of shares   (153,314 )                    
Proceeds from borrowings   44,500       190,000               978,500  
Repayments of debt   (20,000 )     (1,090,000 )       (1,038,986 )     (913,209 )
Debt issuance costs paid   (2,892 )     (7,729 )       (151 )     (752 )
Payment to holders of claims under the Predecessor’s second lien notes                 (30,000 )    
Distributions to unitholders   (18,717 )                  
Other   (841 )     (1,211 )       (4,593 )     (14,845 )
Net cash used in financing activities – continuing operations   (632,713 )     (1,111,473 )       (437,730 )     (164,150 )
Net cash used in financing activities – discontinued operations                        
Net cash used in financing activities   (632,713 )     (1,111,473 )       (437,730 )     (164,150 )
                 
Net increase (decrease) in cash, cash equivalents and restricted cash   (471,145 )     376,900         (343,772 )     480,718  
Cash, cash equivalents and restricted cash:                
Beginning   520,922       144,022         487,784       7,076  
Ending $ 49,777     $ 520,922       $ 144,022     $ 487,794  
                                 

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 December 31,   Year Ended December 31,
  2018   2017   2018   2017
               
  (in thousands)
Net income $ 10,606     $ 84,937     $ 40,607     $ 3,022,204  
Plus (less):        
Income from discontinued operations       (5,749 )     (19,674 )     (89,516 )
Interest expense   835       406       2,417       29,105  
Income tax expense   4,340       226,910       29,587       385,488  
Depreciation, depletion and amortization   22,998       32,153       94,958       180,866  
Exploration costs   1,436       2,100       5,178       3,230  
EBITDAX   40,215       340,757       153,073       3,531,377  
Plus (less):        
Impairment of long-lived assets   15,697           15,697      
Noncash (gains) losses on oil and natural gas derivatives   (13,885 )     12,880       6,475       (90,863 )
Accrued settlements on oil derivative contracts related to
 current production period (2)
  1,015       (2,975 )     2,459       (1,775 )
Share-based compensation expenses   540       15,409       131,828       91,540  
Write-off of deferred financing fees               2,975  
Gains on sale of assets and other, net (3)   (596 )     (291,572 )     (207,833 )     (626,807 )
Reorganization items, net (4)   672       304       5,159       (2,512,604 )
Adjusted EBITDAX $ 43,658     $ 74,803     $ 106,858     $ 393,843  
 
(1) All amounts reflect the combined results of the seven months ended September 30, 2017 (successor) and the two months ended February 28, 2017 (predecessor).
(2) Represent amounts related to oil 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.
(3) Primarily represent gains or losses on the sale of assets, earnings from equity method investments and gains or losses on inventory valuation.
(4) 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.
 

Schedule 2 - PV-10 (Non-GAAP Measure)
PV-10 represents the present value, discounted at 10% per year, of estimated future net cash flows. The Company’s calculation of PV-10 herein differs from the standardized measure of discounted future net cash flows determined in accordance with the rules and regulations of the SEC in that it is calculated before income taxes and including the impact of helium, rather than after income taxes and not including the impact of helium, using the average price during the 12-month period, determined as an unweighted average of the first-day-of-the-month price for each month. The Company’s calculation of PV-10 should not be considered as an alternative to the standardized measure of discounted future net cash flows determined in accordance with the rules and regulations of the SEC.

 
The following presents a reconciliation of standardized measure of discounted future net cash flows to the Company’s calculation of PV-10 at December 31, 2018 (in millions):
 
Standardized measure of discounted future net cash flows (1)   $ 747  
Plus: Difference due to exclusion of federal income taxes     125  
Plus: Difference due to the inclusion of helium     149  
PV-10   $ 1,021  
 
(1) Estimated using the average price during the 12-month period, determined as an unweighted average of the first-day-of-the-month price for each month, which were $65.66 per Bbl and $3.10 per MMBtu.
 

RIVIERA RESOURCES_NO Inc_LOGO.jpg

Source: Riviera Resources, Inc.