rvra-8k_20181108.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 8, 2018 (November 8, 2018)

 

 

 

 

Riviera Resources, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

333-225927

82-5121920

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

 

600 Travis

Houston, Texas

77002

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code:  (281) 840-4000

 

NOT APPLICABLE

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

 

 

 


Item 2.02      Results of Operations and Financial Condition.

On November 8, 2018, Riviera Resources, Inc. issued a press release announcing its earnings for the quarter ended September 30, 2018, and its guidance for 2018.  The press release is being furnished as Exhib.it 99.1 to this Current Report on Form 8‑K and is incorporated herein by reference.

This Form 8-K and the exhibit hereto shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any registration statement of the issuer.

Item 9.01      Financial Statements and Exhibits.

(d)     Exhibit.

 

 

 

 

 

Exhibit Number

 

Description

 

 

 

Exhibit 99.1

 

Press release dated November 8, 2018.

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

RIVIERA RESOURCES, INC.

 

 

(Registrant)

 

 

 

Date: November 8, 2018

 

/s/ David B. Rottino

 

 

David B. Rottino

 

 

President and Chief Executive Officer

 

rvra-ex991_6.htm

Exhibit 99.1

RIVIERA RESOURCES REPORTS THIRD-QUARTER 2018 RESULTS

HOUSTON, November 8, 2018 – Riviera Resources, Inc. (OTCQX: RVRA) (“Riviera” or the “Company”) announces financial and operating results for the third quarter 2018 and highlights the following:

 

Completed spin-off from LINN Energy, Inc. (“LINN”) on August 7, 2018

 

Since the spin-off, returned over $140 million of capital to shareholders through share repurchases and tender offer

 

Outperformed third quarter guidance, as provided in our August 2018 conference call, with respect to adjusted EBITDAX and production, on lower capital spending

 

Increasing our fourth quarter operated drilling activity with plans to begin drilling two wells in Northern Louisiana in addition to running an operated rig in the Northwest STACK

 

Blue Mountain Midstream LLC (“Blue Mountain”), a wholly-owned subsidiary of Riviera, established a stand-alone $200 million credit facility with current available capacity of approximately $72 million

 

Blue Mountain added 25,000 HP compression at Cryo I plant, expanding to its full 250 MMcf/d capacity

 

Blue Mountain raised EBITDA estimate for its Cryo I plant which, when full, will generate between $110-$125 million, and is exploring plant expansion

"Since our spin-off from LINN three months ago, we continue to deliver on our commitment to maximize value for our shareholders 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 have maximized the use of cash on hand to return over $140 million of capital to shareholders through our ongoing share repurchase program and recently completed tender offer. Operationally, we outperformed guidance this quarter, on lower capital spending, which resulted in a much higher cash balance than was forecasted. We are excited to begin a drilling program in the fourth quarter on our high quality upstream asset base. Finally, we will continue to grow our rapidly expanding Blue Mountain midstream business and believe it could be a future high growth standalone business” said David Rottino, Riviera’s President and Chief Executive Officer.

Key Financial Results (1)

 

Third Quarter

$ in millions, except per unit amounts

2018

2017

Average daily production (MMcfe/d)

302

586

Total oil, natural gas and NGL revenues  

$ 90

$ 206

Income (loss) from continuing operations

($ 33)

$ 44

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

($ 15)

$ 78

Net income (loss)

($ 48)

$ 122

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

$ 12

$ 93

Net cash provided by (used in) operating activities

($ 85)

$ 68

Oil and natural gas capital

$ 7

$ 81

Total capital

$ 34

$ 123

(1)

All amounts reflect continuing operations with the exception of net income.

(2)

Excludes Adjusted EBITDAX from discontinued operations of approximately $3 million for the three months ended September 30, 2017. Includes severance costs and spin-off related costs of approximately $8 million and $7 million, respectively, for the three months ended September 30, 2018.

 



Successful Tender Offer

The Company continues to focus on enhancing shareholder value and finding ways to return capital to its shareholders and on September 24, 2018, it announced the intention to commence a tender offer to purchase $100 million of the Company’s common stock. The Company believes its shares are deeply undervalued, and this tender offer was an optimal use of available cash consistent with the Company’s strategy of maximizing value for shareholders. Funds affiliated with Fir Tree Capital Management LP, Elliott Associates, L.P., York Capital Management, L.P. and P. Schoenfeld Asset Management LP, which, immediately prior to the settlement of the tender offer, collectively beneficially owned approximately 55% of the Company’s outstanding common stock, and all of the Company’s directors and executive officers, did not participate in the tender offer and did not tender any of their common stock.

The tender offer was completed on October 23, 2018. The Company expanded the tender offer to repurchase an aggregate of 6,062,179 shares of common stock at a price of $22.00 per share for a total cost of approximately $133 million (excluding expenses of the tender offer). The shares acquired represented approximately 8% of the Company’s outstanding shares as of September 24, 2018.

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. This program is intended to continue the Company’s commitment to shareholder returns, capital discipline, and the efficient management of the Company’s assets, including cash on hand.

In September 2018, the Company repurchased an aggregate of 354,656 shares of common stock at an average price of $21.24 per share for a total cost of approximately $8 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 September 24, 2018 announcement of the intent to commence a tender offer as discussed above. At October 31, 2018, approximately $92 million was available for share repurchase under the program. The Company intends to resume share purchases under the program later this month.

Third Quarter 2018 Activity – Upstream Assets

Riviera’s production for the third quarter averaged approximately 302 MMcfe/d, which is 4% above the mid-point of our original guidance range for the quarter.  The outperformance in production is mainly due to higher production from non-operated drilling in the NW Stack and lower downtime across our mature asset base.  The Company’s LOE for the quarter was at the low end of the guidance range at approximately $23 million, representing a lifting cost of approximately $0.83 per Mcfe.  The continual outperformance in production from our asset base and consistent lease operating expenses illustrates the predictability of our asset base, which currently has a low annual decline of approximately 10-12%.  Additionally, we believe there is significant value in the upside development opportunities throughout our NW Stack, Arkoma, East Texas, and North Louisiana acreage positions.

NW STACK / North Louisiana Operated Drilling Program

The Company is initiating an operated drilling program in the NW STACK play starting in the fourth quarter of 2018.  The Company is encouraged by recent results from offset operators, including wells the Company participated in as a non-operator. With over 60,000 net acres in the Company’s core NW STACK focus area, Riviera believes extensive upside could be realized by delineating the play with an operated drilling program.

In addition to the NW STACK drilling program, the Company intends to drill two North Louisiana Middle Pool Sand locations beginning in December 2018.  Based on the success of our predecessor on this acreage and recent offset performance, we believe excellent drilling locations remain on our North Louisiana acreage and we intend to exploit these high return opportunities.

Blue Mountain Midstream Business Updates

Throughput volumes at Blue Mountain’s cryogenic natural gas processing plant (“Cryo I plant”) ramped up significantly during the third quarter of 2018, with natural gas peak throughput more than doubling from 61 MMcf/d to 150 MMcf/d. On average for the third quarter, natural gas throughput was 123 MMcf/d and NGLs produced were 8,930 Bbl/d. A sustained throughput volume ramp up during the third quarter was limited by normal, one-time outages for ongoing compression installation and downstream tie-ins required to increase natural gas takeaway capacity, as well as coordinated scheduling of new production coming online to mitigate shut-in impacts. Also during the third quarter, Blue Mountain began commissioning its new amine facility, which is now operational.

2


In the fourth quarter of 2018, Blue Mountain commissioned 25,000 horsepower compression at its Cryo I plant, increasing its processing capacity to the full 250 MMcf/d. Commissioning, outages and coordinated scheduling of attachments are expected to have similar impacts to the throughout volume ramp up early in the fourth quarter. Management estimates average natural gas throughput to range between 130 MMcf/d and 150 MMcf/d for the fourth quarter of 2018. Management is confident in the continued volume growth in Oklahoma and has begun initial design and engineering of a second train to increase Blue Mountain’s processing capacity at its 80-acre site in Grady County, Oklahoma. Management continues its evaluation to determine the ultimate size and timing based on current production levels and latest customer production forecasts, along with ongoing business development activities.

Blue Mountain is looking to diversify its reach and service offerings through scalable growth platforms in Central Oklahoma and is in active discussions to develop oil and water gathering infrastructure in the Merge play. In addition, Blue Mountain is looking to extend its reach into new plays and is working closely with Riviera and other third-party producers to provide midstream solutions as they develop their Northwest STACK positions.

Strong Balance Sheet

As of September 30, 2018, the Company had no borrowings outstanding under both its credit facilities, one at Riviera and the other at Blue Mountain. At quarter end, the Company had borrowing commitments of up to $425 million revolving credit facility at Riviera, and approximately $85 million at Blue Mountain, with available borrowing capacity of approximately $391 million at Riviera, and $72 million at Blue Mountain, inclusive of outstanding letters of credit. Riviera had a third quarter consolidated ending cash balance of approximately $157 million. In October 2018, Riviera used cash on hand to fund the $133 million tender offer, as well other working capital obligations. As of October 31, 2018, total borrowings under the Riviera credit facility were $20 million, and the Company has approximately $371 million of available borrowing capacity under the Riviera credit facility.

Completed Spin-Off of Riviera Resources, Inc. from LINN Energy, Inc.

As previously disclosed, the spin-off of Riviera Resources, Inc. from LINN (the “Spin-Off’) was completed on August 7, 2018. Following the Spin-Off, Riviera holds, directly or through its subsidiaries, substantially all of the assets of LINN, other than LINN’s 50% equity interest in Roan Resources LLC (“Roan”). The Spin-Off was effected through a pro rata distribution of all of the outstanding shares of Riviera’s common stock to LINN stockholders of record as of 5:00 p.m. on August 3, 2018, the record date for the Spin-Off.  On August 7, 2018, the distribution date for the Spin-Off, each LINN stockholder received one share of Riviera common stock for each share of LINN common stock held by such stockholder on the record date.

Riviera has completed the tax analysis of the Spin-Off and does not anticipate any cash taxes will be owed by the Company as a result of the transaction.

3


Third Quarter Actuals versus Revised Guidance

 

Q3 2018

Actuals

Original Guidance(7)

Q3 2018E

Updated Guidance(7)

Q3 2018E

 

 

 

 

Net Production (MMcfe/d)

302

275 – 305

296 – 309

Natural gas (MMcf/d)

243

225 – 250

238 – 248

Oil (Bbls/d)

1,440

1,300 – 1,500

1,400 – 1,500

NGL (Bbls/d)

8,358

6,900 – 7,700

8,200 – 8,600

 

 

 

 

Other revenues, net (in thousands) (1)

$ 9,974(2)

$ 9,000 - $ 13,000

$ 9,000 - $ 11,000

Blue Mountain Midstream business

$ 2,377

$ 3,000 - $ 6,000

$ 2,250 - $ 2,500

Other

$ 7,597

$ 6,000 - $ 7,000

$ 6,750 - $ 8,500

 

 

 

 

Costs (in thousands)

$ 52,396

$ 48,000 – $ 54,000

$ 50,000 – $ 55,000

Lease operating expenses

$ 22,930

$ 23,000 – $ 25,000

$ 22,000 – $ 24,000

Transportation expenses

$ 22,304

$ 19,000 – $ 21,000

$ 21,000 – $ 23,000

Taxes, other than income taxes

$ 7,162

$ 6,000 – $ 8,000

$ 7,000 – $ 8,000

 

 

 

 

Adjusted general and administrative expenses (3)

$ 26,814(4)

$ 22,000 – $ 24,000

$ 26,000 – $ 27,000

General and administrative- severance expenses

$ 8,054

$ 12,000 – $ 14,000

$ 7,500 – $ 8,500

 

 

 

 

Targets (Mid-Point) (in thousands)

 

 

 

Adjusted EBITDAX

$ 11,840(5)

$ 4,000(6)

$ 12,000(5)

Oil and natural gas capital

$ 7,426

$ 16,000

$ 7,500

Blue Mountain Midstream capital

$ 22,570

$ 29,000

$ 22,500

Total capital

$ 33,949

$ 50,000

$ 34,000

 

 

 

 

(1)

Includes other revenues and margin on marketing activities

(2)

Includes other revenues of approximately $5.9 million, plus marketing revenues of approximately $67.2 million, less marketing expenses of approximately $63.1 million for the three months ended September 30, 2018

(3)

Excludes share-based compensation expenses and severance expenses.

(4)

For the three months ended September 30, 2018 represents general and administrative expenses of approximately $90.9 million, excluding share-based compensation expenses of approximately $56.1 million and severance expenses of approximately $8 million

(5)

Includes a reduction to Adjusted EBITDAX for certain non-recurring estimated G&A expenses, including severance expenses of $8 million, spin transaction costs of $7 million, land diligence costs of $1 million

(6)

Includes a reduction to Adjusted EBITDAX for certain non-recurring estimated G&A expenses, including severance expenses of $13 million, spin transaction costs of $6 million, land diligence costs of $1 million

(7)

Original guidance estimates provided in August 23, 2018 investor presentation; Updated guidance provided in October 18, 2018 press release

(8)


4


Fourth Quarter and Revised Full Year 2018 Guidance

 

 

Q4 2018E

 

FY 2018E

 

Net Production (MMcfe/d)

273 – 303

322 – 329

Natural gas (MMcf/d)

220 – 245

242 – 248

Oil (Bbls/d)

1,350 – 1,500

3,240 – 3,280

NGL (Bbls/d)

7,500 – 8,100

10,100 – 10,250

 

 

 

Other revenues, net (in thousands) (1)

$ 15,000 - $ 21,000

$ 45,000 –  $ 51,000

Blue Mountain Midstream business

$ 8,000 - $ 12,000

$ 12,000 - $16,000

Other

$ 7,000 - $ 9,000

$ 33,000 - $ 35,000

 

 

 

Costs (in thousands)

$ 49,000 – $ 55,000

$ 230,000 – $ 236,000

Lease operating expenses

$ 23,000 – $ 25,000

$ 118,000 –  $ 120,000

Transportation expenses

$ 20,000 – $ 22,000

$ 83,000 – $ 85,000

Taxes, other than income taxes

$ 6,000 – $ 8,000

$ 29,000 – $ 31,000

 

 

 

Adjusted general and administrative expenses (2)

$ 17,000 – $ 20,000

$ 87,500 – $ 90,500

General and administrative - severance expenses

$ 1,000 – $ 2,000

$ 27,000 – $ 28,000

 

 

 

Costs per Mcfe (Mid-Point)

$ 1.96

$ 1.96

Lease operating expenses

$ 0.91

$ 1.00

Transportation expenses

$ 0.79

$ 0.71

Taxes, other than income taxes

$ 0.26

$ 0.25

 

 

 

Targets (Mid-Point) (in thousands)

 

 

Adjusted EBITDAX

$ 30,000(3)

$ 93,000(4)

Interest expense (5)

$ 150

$ 150

Oil and natural gas capital

$ 29,000

$ 54,000

Blue Mountain Midstream Capital

$ 13,000

$ 125,000

Total capital

$ 44,000

$ 187,000

 

 

 

Weighted Average NYMEX Differentials

 

 

Natural gas (MMBtu)

($ 0.32) – ($ 0.28)

($ 0.34) – ($ 0.32)

Oil (Bbl)

($ 3.00) – ($ 2.75)

($ 4.45) – ($ 4.40)

NGL price as a % of crude oil price

37% – 41%

37% – 38%

 

Unhedged Commodity Price Assumptions

Oct

Nov

Dec

2018E

Natural gas (MMBtu)

$ 3.02

$ 3.19

$ 3.23

$ 2.96

Oil (Bbl)

$ 70.76

$ 69.12

$ 67.59

$ 67.39

NGL (Bbl)

$ 27.44

$ 26.80

$ 26.21

$ 24.88

 

 

(1)

Includes other revenues and margin on marketing activities

 

(2)

Excludes share-based compensation expenses and severance expenses

 

(3)

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

 

(4)

Includes a reduction to Adjusted EBITDAX for certain non-recurring estimated G&A expenses, including severance expenses of $27.5 million, costs associated with managing assets divested during 2018, associated divestment costs of $1 million, required transition services under purchase and sale agreements, estimated spin transaction costs of $8.1 million, land diligence costs of $3.6 million. Additional information can be found in slide 10 of our supplemental presentation posted to our website

 

(5)

Excludes non cash amortization of deferred financing costs

 

5


Hedging Update

 

Q4 2018

2019

2020

Natural Gas

Volume (MMMBtu/d)

Average Price

(per MMBtu)

Volume (MMMBtu/d)

Average Price

(per MMBtu)

Volume (MMMBtu/d)

Average Price

(per MMBtu)

Swaps

191

$3.02

101

$2.88

-

$ -

Collars

-

$ -

20

$2.75 - $3.00

-

$ -

Oil

Volume

(Bbls/d)

Average Price

(per Bbl)

Volume

(Bbls/d)

Average Price

(per Bbl)

Volume

(Bbls/d)

Average Price

(per Bbl)

Swaps

1,598

$54.95

1,099

$64.52

500

$64.63

Natural Gas Basis Differential positions

Volume (MMMBtu/d)

Average Price

(per MMBtu)

Volume (MMMBtu/d)

Average Price

(per MMBtu)

Volume (MMMBtu/d)

Average Price

(per MMBtu)

PEPL Basis Swaps

60

($0.66)

70

($0.64)

-

$ -

MichCon Basis Swaps

10

($0.20)

20

($0.19)

10

($0.19)

NGPL TX-OK Basis Swaps

10

($0.19)

-

$ -

-

$ -

NWPL Basis Swaps

-

$ -

10

($0.61)

-

$ -

Earnings Call / Form 10‑Q

The Company will host a conference call Thursday, November 8, 2018 at 10 a.m. (Central) to discuss the Company’s third quarter 2018 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 (877) 706-1090, or (857) 270-6216 for international calls using Conference ID: 6034478. 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

Future Conference Attendance

Riviera announced today that it will participate in at the Cowen and Company Energy and Natural Resources Conference on December 5, 2018 in New York City.  The Company will be participating in one-on-one meetings with investors.

Presentation materials will be available on the Company’s website at www.RivieraResourcesInc.com under the Investor Relations tab on the date of the event.

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. 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 Registration Statement on Form S-1, 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

 

6


Condensed Consolidated Balance Sheets (Unaudited)

 

 

September 30, 2018

 

 

December 31, 2017

 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

156,917

 

 

$

464,477

 

Accounts receivable – trade, net

 

 

85,482

 

 

 

140,485

 

Derivative instruments

 

 

3,024

 

 

 

9,629

 

Restricted cash

 

 

27,130

 

 

 

56,445

 

Other current assets

 

 

19,688

 

 

 

76,683

 

Assets held for sale

 

 

12

 

 

 

106,963

 

Total current assets

 

 

292,253

 

 

 

854,682

 

Noncurrent assets:

 

 

 

 

 

 

 

 

Oil and natural gas properties (successful efforts method)

 

 

789,844

 

 

 

950,083

 

Less accumulated depletion and amortization

 

 

(71,684

)

 

 

(49,619

)

 

 

 

718,160

 

 

 

900,464

 

 

 

 

 

 

 

 

 

 

Other property and equipment

 

 

592,073

 

 

 

480,729

 

Less accumulated depreciation

 

 

(53,264

)

 

 

(28,658

)

 

 

 

538,809

 

 

 

452,071

 

 

 

 

 

 

 

 

 

 

Derivative instruments

 

 

328

 

 

 

469

 

Deferred income taxes

 

 

133,410

 

 

 

188,538

 

Other noncurrent assets

 

 

13,193

 

 

 

14,256

 

Noncurrent assets of discontinued operations

 

 

 

 

 

457,645

 

 

 

 

146,931

 

 

 

660,908

 

Total noncurrent assets

 

 

1,403,900

 

 

 

2,013,443

 

Total assets

 

$

1,696,153

 

 

$

2,868,125

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

169,860

 

 

$

253,975

 

Derivative instruments

 

 

5,507

 

 

 

10,103

 

Other accrued liabilities

 

 

25,277

 

 

 

58,130

 

Liabilities held for sale

 

 

 

 

 

43,302

 

Total current liabilities

 

 

200,644

 

 

 

365,510

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Derivative instruments

 

 

1,088

 

 

 

2,849

 

Asset retirement obligations and other noncurrent liabilities

 

 

105,102

 

 

 

160,720

 

Total noncurrent liabilities

 

 

106,190

 

 

 

163,569

 

Equity:

 

 

 

 

 

 

 

 

Common stock

 

 

758

 

 

 

 

Additional paid-in capital

 

 

1,394,215

 

 

 

 

Accumulated deficit

 

 

(5,654

)

 

 

 

Net parent company investment

 

 

 

 

 

2,339,046

 

Total equity

 

 

1,389,319

 

 

 

2,339,046

 

Total liabilities and equity

 

$

1,696,153

 

 

$

2,868,125

 

 

7


Condensed Consolidated Statements of Operations (Unaudited)

 

 

Successor

 

 

 

Three Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

 

(in thousands, except per share

amounts)

 

Revenues and other:

 

 

 

 

 

 

 

 

Oil, natural gas and natural gas liquids sales

 

$

89,653

 

 

$

206,318

 

Losses on oil and natural gas derivatives

 

 

(3,175

)

 

 

(14,497

)

Marketing revenues

 

 

67,246

 

 

 

38,493

 

Other revenues

 

 

5,877

 

 

 

6,368

 

 

 

 

159,601

 

 

 

236,682

 

Expenses:

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

22,930

 

 

 

61,272

 

Transportation expenses

 

 

22,304

 

 

 

34,541

 

Marketing expenses

 

 

63,149

 

 

 

34,099

 

General and administrative expenses

 

 

90,931

 

 

 

30,035

 

Exploration costs

 

 

2,487

 

 

 

171

 

Depreciation, depletion and amortization

 

 

21,515

 

 

 

37,766

 

Taxes, other than income taxes

 

 

7,162

 

 

 

12,368

 

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

 

 

221

 

 

 

(25,896

)

 

 

 

230,699

 

 

 

184,356

 

Other income and (expenses):

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(594

)

 

 

(223

)

Other, net

 

 

105

 

 

 

(4,246

)

 

 

 

(489

)

 

 

(4,469

)

Reorganization items, net

 

 

(1,277

)

 

 

(2,605

)

Income (loss) from continuing operations before income taxes

 

 

(72,864

)

 

 

45,252

 

Income tax expense (benefit)

 

 

(39,628

)

 

 

1,646

 

Income (loss) from continuing operations

 

 

(33,236

)

 

 

43,606

 

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

 

 

(14,899

)

 

 

78,556

 

Net income (loss)

 

$

(48,135

)

 

$

122,162

 

Income (loss) per share:

 

 

 

 

 

 

 

 

Income (loss) from continuing operations per share ‒ Basic

 

$

(0.43

)

 

$

0.57

 

Income (loss) from continuing operations per share ‒ Diluted

 

$

(0.43

)

 

$

0.57

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations per share ‒ Basic

 

$

(0.20

)

 

$

1.03

 

Income (loss) from discontinued operations per share ‒ Diluted

 

$

(0.20

)

 

$

1.03

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share ‒ Basic

 

$

(0.63

)

 

$

1.60

 

Net income (loss) per share ‒ Diluted

 

$

(0.63

)

 

$

1.60

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding ‒ Basic

 

 

76,135

 

 

 

76,191

 

Weighted average shares outstanding ‒ Diluted

 

 

76,135

 

 

 

76,191

 

 

8


Condensed Consolidated and Combined Statements of Operations – Continued (Unaudited)

 

 

Successor

 

 

Predecessor

 

 

 

Nine Months Ended September 30, 2018

 

 

Seven Months Ended September 30, 2017

 

 

Two Months Ended February 28, 2017

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other:

 

 

 

 

 

 

 

 

 

 

 

 

Oil, natural gas and natural gas liquids sales

 

$

313,533

 

 

$

529,810

 

 

$

188,885

 

Gains (losses) on oil and natural gas derivatives

 

 

(25,730

)

 

 

19,258

 

 

 

92,691

 

Marketing revenues

 

 

156,480

 

 

 

53,954

 

 

 

6,636

 

Other revenues

 

 

18,158

 

 

 

14,787

 

 

 

9,915

 

 

 

 

462,441

 

 

 

617,809

 

 

 

298,127

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating expenses

 

 

94,902

 

 

 

156,959

 

 

 

49,665

 

Transportation expenses

 

 

62,611

 

 

 

85,652

 

 

 

25,972

 

Marketing expenses

 

 

145,231

 

 

 

43,614

 

 

 

4,820

 

General and administrative expenses

 

 

228,105

 

 

 

74,703

 

 

 

71,745

 

Exploration costs

 

 

3,742

 

 

 

1,037

 

 

 

93

 

Depreciation, depletion and amortization

 

 

71,960

 

 

 

101,558

 

 

 

47,155

 

Taxes, other than income taxes

 

 

22,729

 

 

 

37,316

 

 

 

14,877

 

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

 

 

(208,009

)

 

 

(333,720

)

 

 

672

 

 

 

 

421,271

 

 

 

167,119

 

 

 

214,999

 

Other income and (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(1,582

)

 

 

(11,974

)

 

 

(16,725

)

Other, net

 

 

473

 

 

 

(5,800

)

 

 

(149

)

 

 

 

(1,109

)

 

 

(17,774

)

 

 

(16,874

)

Reorganization items, net

 

 

(4,487

)

 

 

(8,229

)

 

 

2,521,137

 

Income from continuing operations before income taxes

 

 

35,574

 

 

 

424,687

 

 

 

2,587,391

 

Income tax expense (benefit)

 

 

25,247

 

 

 

158,744

 

 

 

(166

)

Income from continuing operations

 

 

10,327

 

 

 

265,943

 

 

 

2,587,557

 

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

 

 

19,674

 

 

 

84,315

 

 

 

(548

)

Net income

 

$

30,001

 

 

$

350,258

 

 

$

2,587,009

 

Income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations per share ‒ Basic

 

$

0.13

 

 

$

3.49

 

 

$

33.96

 

Income from continuing operations per share ‒ Diluted

 

$

0.13

 

 

$

3.49

 

 

$

33.96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations per share ‒ Basic

 

$

0.26

 

 

$

1.11

 

 

$

(0.01

)

Income (loss) from discontinued operations per share ‒ Diluted

 

$

0.26

 

 

$

1.11

 

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share ‒ Basic

 

$

0.39

 

 

$

4.60

 

 

$

33.95

 

Net income per share ‒ Diluted

 

$

0.39

 

 

$

4.60

 

 

$

33.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding ‒ Basic

 

 

76,171

 

 

 

76,191

 

 

 

76,191

 

Weighted average shares outstanding ‒ Diluted

 

 

76,518

 

 

 

76,191

 

 

 

76,191

 

 

9


Condensed Consolidated and Combined Statements of Cash Flows (Unaudited)

 

 

Successor

 

 

Predecessor

 

 

 

Nine Months Ended

September 30, 2018

 

 

Seven Months Ended

September 30, 2017

 

 

Two Months Ended February 28, 2017

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

30,001

 

 

$

350,258

 

 

$

2,587,009

 

Adjustments to reconcile net income to net cash provided by

   (used in) operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

(Income) loss from discontinued operations

 

 

(19,674

)

 

 

(84,315

)

 

 

548

 

Depreciation, depletion and amortization

 

 

71,960

 

 

 

101,558

 

 

 

47,155

 

Deferred income taxes

 

 

25,382

 

 

 

115,739

 

 

 

(166

)

Total (gains) losses on derivatives, net

 

 

25,730

 

 

 

(19,258

)

 

 

(92,691

)

Cash settlements on derivatives

 

 

(25,341

)

 

 

19,638

 

 

 

(11,572

)

Share-based compensation expenses

 

 

16,105

 

 

 

25,876

 

 

 

50,255

 

Amortization and write-off of deferred financing fees

 

 

1,336

 

 

 

3,349

 

 

 

1,338

 

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

 

 

(204,644

)

 

 

(355,122

)

 

 

1,069

 

Reorganization items, net

 

 

 

 

 

 

 

 

(2,456,074

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

(Increase) decrease in accounts receivable – trade, net

 

 

57,674

 

 

 

15,549

 

 

 

(7,216

)

(Increase) decrease in other assets

 

 

61,309

 

 

 

(1,218

)

 

 

528

 

Increase (decrease) in accounts payable and accrued expenses

 

 

(51,608

)

 

 

(90,073

)

 

 

20,949

 

Increase (decrease) in other liabilities

 

 

(15,750

)

 

 

56,460

 

 

 

2,801

 

Net cash provided by (used in) operating activities –

   continuing operations

 

 

(27,520

)

 

 

138,441

 

 

 

143,933

 

Net cash provided by operating activities – discontinued operations

 

 

 

 

 

2,566

 

 

 

8,781

 

Net cash provided by (used in) operating activities

 

 

(27,520

)

 

 

141,007

 

 

 

152,714

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Development of oil and natural gas properties

 

 

(56,116

)

 

 

(136,638

)

 

 

(50,597

)

Purchases of other property and equipment

 

 

(116,237

)

 

 

(60,656

)

 

 

(7,409

)

Proceeds from sale of properties and equipment and other

 

 

367,086

 

 

 

711,360

 

 

 

(166

)

Net cash provided by (used in) investing activities –

   continuing operations

 

 

194,733

 

 

 

514,066

 

 

 

(58,172

)

Net cash provided by (used in) investing activities –

   discontinued operations

 

 

7,000

 

 

 

345,643

 

 

 

(584

)

Net cash provided by (used in) investing activities

 

 

201,733

 

 

 

859,709

 

 

 

(58,756

)

 

 

 

 

 

 

 

 

 

 

 

 

 

10


Condensed Consolidated Statements of Cash Flows (Unaudited) – Continued

 

 

Successor

 

 

Predecessor

 

 

 

Nine Months Ended

September 30, 2018

 

 

Seven Months Ended

September 30, 2017

 

 

Two Months Ended February 28, 2017

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net transfers (to) from parent

 

 

(481,449

)

 

 

(154,176

)

 

 

636,000

 

Repurchases of shares

 

 

(7,576

)

 

 

 

 

 

 

Proceeds from borrowings

 

 

 

 

 

190,000

 

 

 

 

Repayments of debt

 

 

 

 

 

(1,090,000

)

 

 

(1,038,986

)

Debt issuance costs paid

 

 

(2,505

)

 

 

(7,229

)

 

 

(151

)

Payment to holders of claims under the Predecessor’s second lien notes

 

 

 

 

 

 

 

 

(30,000

)

Distributions to unitholders

 

 

(18,717

)

 

 

 

 

 

 

Other

 

 

(841

)

 

 

 

 

 

(4,593

)

Net cash used in financing activities – continuing operations

 

 

(511,088

)

 

 

(1,061,405

)

 

 

(437,730

)

Net cash used in financing activities – discontinued operations

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

 

(511,088

)

 

 

(1,061,405

)

 

 

(437,730

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(336,875

)

 

 

(60,689

)

 

 

(343,772

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning

 

 

520,922

 

 

 

144,022

 

 

 

487,794

 

Ending

 

$

184,047

 

 

$

83,333

 

 

$

144,022

 

 

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,

 

 

2018

 

 

2017

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(48,135

)

 

$

122,162

 

Plus (less):

 

 

 

 

 

 

 

(Income) loss from discontinued operations

 

14,899

 

 

 

(78,556

)

Interest expense

 

594

 

 

 

223

 

Income tax expense (benefit)

 

(39,628

)

 

 

1,646

 

Depreciation, depletion and amortization

 

21,515

 

 

 

37,766

 

Exploration costs

 

2,487

 

 

 

171

 

EBITDAX

 

(48,268

)

 

 

83,412

 

Plus (less):

 

 

 

 

 

 

 

Noncash losses on oil and natural gas derivatives

 

2,869

 

 

 

26,346

 

Accrued settlements on oil derivative contracts related

  to current production period (2)

 

(124

)

 

 

(1,685

)

Share-based compensation expenses

 

56,063

 

 

 

6,277

 

Write-off of deferred financing fees and other

 

 

 

 

2,975

 

(Gains) losses on sale of assets and other, net (3)

 

23

 

 

 

(26,528

)

Reorganization items, net (4)

 

1,277

 

 

 

2,605

 

Adjusted EBITDAX

$

11,840

 

 

$

93,402

 

 

12


Adjusted EBITDAX (Non-GAAP Measure) – Continued

 

Nine Months Ended September 30,

 

 

2018

 

 

2017 (1)

 

(in thousands)

(in thousands)

 

 

 

 

 

 

 

 

 

Net income

$

30,001

 

 

$

2,937,267

 

Plus (less):