Roan Resources, Inc. Reports Third Quarter 2019 Results

Roan Resources, Inc. (NYSE: ROAN) (“Roan” or the “Company”) today announced third quarter 2019 operating and financial results.

Merger with Citizen Energy

• On October 1, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Citizen Energy Operating, LLC, a Delaware limited liability company (“Citizen Operating”), Citizen Energy Pressburg, Inc., a Delaware corporation and wholly owned subsidiary of Citizen Operating (“Merger Sub”) and the Company. The Merger Agreement provides for, among other things, the merger of the Company into Merger Sub with the Company as the surviving entity and a wholly owned subsidiary of Citizen Operating (the “Merger”).
• Roan expects the Merger to close during the fourth quarter of 2019 or the first quarter of 2020, subject to Roan stockholder approval, regulatory approvals and the satisfaction of other customary closing conditions.
• Shareholders are invited to attend the special meeting on December 4, 2019, to consider and vote on proposals related to the proposed acquisition of the company. Please refer to the Proxy Statement filed with the SEC on November 4, 2019 for additional details.
• For further information related to the Merger, interested parties are invited to access the Merger Proxy Statement on the Company’s website at www.RoanResources.com under the “Investors” section of the site.

Third Quarter 2019 Highlights

• Production of approximately 53.7 thousand barrels of oil equivalent per day (MBoe/d) (26% oil, 27% natural gas liquids (NGLs), 47% gas), which represented an increase of 15% as compared to the third quarter of 2018. The Company elected to be in ethane rejection for the quarter;

  	3Q 2019		2Q 2019		3Q 2018
  Production Data
  Oil (MBbls)	1,291		1,198		1,089
  Natural gas (MMcf)	13,820		12,533		11,417
  Natural gas liquids (MBbls)	1,345		1,339		1,286
  Total volumes (MBoe)	4,939		4,626		4,278
  Average daily total volumes (MBoe/d)	53.7		50.8		46.5

• Net income was $19.3 million, or $0.13 per diluted share; Adjusted EBITDAX(1) (non-GAAP) was $86.8 million;
• Capital expenditures totaled approximately $130.9 million;
• The Company drilled 14 gross (8.3 net) operated wells (26.0 gross lateral miles) during the third quarter. The Company also brought online 18 gross (14.2 net) operated wells during the third quarter.

Financial Update

Third quarter 2019 net income was $19.3 million, or $0.13 per dilutive share, and adjusted net income (non-GAAP) was $13.9 million, or $0.09 per dilutive share. Third quarter 2019 Adjusted EBITDAX (non-GAAP) was $86.8 million.

See the definitions and reconciliations of adjusted net income, adjusted net income per share, Adjusted EBITDAX, net funded debt and cash general and administrative (G&A) expense presented within this release to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures provided in the supporting tables or definitions at the conclusion of this press release.

Third quarter 2019 average realized prices were $54.51 per barrel of oil (Bo), $8.05 per barrel of NGLs and $0.81 per Mcf of natural gas, resulting in a total equivalent unhedged price of $18.70 per Boe or a total equivalent hedged price of $22.05 per Boe. Average prices excluding the impact of hedges were approximately 11% lower than the previous quarter primarily due to further weakness in the NGL and natural gas markets.

The Company’s adjusted cash operating costs (non-GAAP) for the third quarter were $4.49 per Boe, including production expense of $2.61 per Boe, production tax of $0.98 per Boe and adjusted cash G&A expense (non-GAAP) of $0.90 per Boe. Cash G&A expense was lower as compared to the second quarter primarily due to a reversal of accrued amounts related to anticipated 2019 performance bonuses.

Capital expenditures for third quarter 2019 totaled approximately $130.9 million, a $16.6 million increase as compared to the second quarter 2019. The increase in capital expenditures is primarily due to increases in working interests as producing well ownership was finalized through the pooling process.

As of the end of the third quarter, Roan had $3.5 million of cash on the balance sheet, $732.6 million drawn on its revolving credit facility and $50.0 million funded on its term loan, resulting in net funded debt (non-GAAP) of $779.2 million. The Company had approximately $50 million of available liquidity through the committed but unfunded balances in the Roan Inc. Term Loan and approximately $17 million of availability on its Credit Facility as of September 30, 2019.

For the fourth quarter, the Company has 13 thousand barrels per day of oil hedged at $60.75 per barrel, 120 thousand MMBtu per day of natural gas hedged at $2.90 per MMBtu, 80 thousand MMBtu per day of natural gas basis hedged at $0.52 per MMBtu and 10 thousand barrels per day of NGLs hedged at $25.65 per barrel. Tables showing the Company’s derivative contracts as of November 4, 2019 are provided at the conclusion of this press release.

Guidance

Roan has also elected to temporarily curtail its drilling and development activity and to suspend all completion activity. This reduction in activity is to allow our new CEO, Rick Gideon, time to assess the Company’s overall operations plan. As a result of this change, investors should no longer rely on the guidance provided by the Company on its last quarterly investor call, and Roan does not expect to otherwise update or provide further guidance.

Third Quarter 2019 Earnings Conference Call

Due to the pending proposed merger, Roan will not host a conference call in conjunction with its third quarter 2019 earnings. Interested parties are invited to access Roan’s Form 10-Q for the third quarter 2019 on the Company’s website at www.RoanResources.com under the “Investors” section of the site.

About Roan Resources

Roan is an independent oil and natural gas company headquartered in Oklahoma City, OK focused on the development, exploration and acquisition of unconventional oil and natural gas reserves in the Merge, SCOOP and STACK plays of the Anadarko Basin in Oklahoma. For more information, please visit www.RoanResources.com, where we routinely post announcements, updates, events, investor information, presentations and recent news releases.

Cautionary Statements

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, are forward-looking statements which contain our current expectations about future results. These forward-looking 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. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2018 and any subsequently filed quarterly reports on Form 10-Q.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, or incidental to the development, production, gathering and sale of oil, natural gas and NGLs. These risks include, but are not limited to, the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance, the structure and timing of any transaction or strategic alternative and whether any transaction or strategic alternative will be completed, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other risks.

Reserve engineering is a process of estimating underground accumulations of oil, natural gas and NGLs that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions would change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of oil, natural gas and NGLs that are ultimately recovered.

Should one or more of the risks or uncertainties described occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this release.

Financial Statements

The information in the following financial statements and tables reflect the results of Roan Resources LLC prior to September 24, 2018 and on and after September 24, 2018, the results of Roan Resources, Inc.

The following table represents the Company's open commodity contracts at September 30, 2019:

Per the covenants of the Merger Agreement, the Company was required to enter into additional commodity contracts. The following table presents the additional derivative contracts entered into in October 2019:

Operating Expenses

Non-GAAP Financial Measures

Adjusted Net Income and Adjusted Net Income per Share

Adjusted net income and adjusted net income per share are non-GAAP performance measures. The Company defines adjusted net income and adjusted net income per share as net income (loss) and net income (loss) per share excluding non-cash gains or losses on derivatives, gains on early terminations of derivative contracts, exploration expense, strategic alternative and merger related expenses, aborted offering costs, severance and other employee matter expense and gain on the sale of other assets. Management uses adjusted net income and adjusted net income per share as an indicator of the Company's operational trends and performance relative to other oil and natural gas companies. Adjusted net income and adjusted net income per share should not be considered an alternative to net income (loss), operating income, or any other measure of financial performance presented in accordance with GAAP or as an indicator of our operating performance.

Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Net Income per Share

Adjusted EBITDAX

Adjusted EBITDAX is a non-GAAP financial measure. The Company defines Adjusted EBITDAX as net income (loss) adjusted for interest expense, income tax expense (benefit), depreciation, depletion, amortization and accretion, exploration expense, non-cash equity-based compensation expense, strategic alternative and merger related expenses, aborted offering costs, severance and employee matter expenses, expense for allowance for doubtful accounts, (gain) loss on derivative contracts, and cash (paid) received upon settlement of derivative contracts, excluding amounts on contracts settled prior to contract maturity. Adjusted EBITDAX is not a measure of net income (loss) as determined by GAAP. Our accounting predecessor, Roan LLC, passed through its taxable income to its owners for income tax purposes and thus, the Company did not incur historical income tax expenses.

The Company believes Adjusted EBITDAX is useful because it allows our management to more effectively evaluate the operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. The Company adds the items listed above to net income (loss) in arriving at Adjusted EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX.

Roan’s computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies or to such measure in our revolving credit facility or any of our other contracts.

The following tables present a reconciliation of Adjusted EBITDAX to net income (loss), our most directly comparable financial measure calculated and presented in accordance with GAAP for each of the periods indicated.

Net Debt

Net Debt is a non-GAAP financial measure equal to long-term debt outstanding on the credit facility and term loan, exclusive of any discounts or fees, less cash on hand.

Net Funded Debt Reconciliation

Cash general and administrative expenses per Boe

Cash G&A expense is a non-GAAP measure, which is defined as total general and administrative expense as determined in accordance with GAAP less equity-based compensation expense, expense for allowance for doubtful accounts, severance and employee matter expense, strategic alternatives and merger related costs and aborted offering costs. Cash G&A expense should not be considered as an alternative to, or more meaningful than, total general and administrative expense as determined in accordance with GAAP and may not be comparable to other companies’ similarly titled measures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20191106006035/en/