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Rosehill Resources Inc. Provides 2020 Guidance and an Operations Update


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Source: Rosehill Resources Inc.

HOUSTON, Dec. 16, 2019 (GLOBE NEWSWIRE) — Rosehill Resources Inc. (“Rosehill” or the “Company”) (NASDAQ: ROSE, ROSEW, ROSEU) today announced its 2020 guidance along with an operational update.

2020 Guidance:

  • Expecting cash flow neutrality, or better for 2020 based on forecasted production, capital expenditures and cash flow
  • Estimated 2020 annual production guidance of 19,500 – 21,500 Boepd (~70% oil and 85% liquids)
  • Planned 2020 capital expenditures of $155 – $175 million, approximately 30% less than midpoint of 2019 guidance with over 90% of capital directed toward drilling and completion activities balanced throughout the year
  • Reduced exposure to commodity price volatility with over 80% of estimated 2020 oil production hedged, based on midpoint of guidance, at floor prices of approximately $60 per barrel while retaining exposure to higher prices.  Similar hedged volumes and floor prices for 2021

Operations Update:

  • Fourth quarter 2019 average net production through November of over 22,000 barrels of oil equivalent per day (“BOEPD”)
  • In December, completed a two well pad in Northern Delaware targeting the Wolfcamp B interval with very encouraging early flowback results based on high casing pressure and increasing oil rates as initial fluid recovery continues
  • Additional recent activity including three drilled uncompleted wells (DUCs) in Northern Delaware targeting the 2nd Bone Spring Sand formation, with continued drilling planned through the remainder of the year, and commencement of completion operations on a two-mile lateral well in Southern Delaware

Management Comments

David French, Rosehill’s President and Chief Executive Officer, commented, “We are pleased to release our 2020 plan highlighted by a 30% reduction in capital expenditures for comparable year over year production to 2019.  We think focused capital allocation is key to demonstrating portfolio strength in today’s environment, and this coming year marks Rosehill’s pivot to cash neutrality inclusive of financing.  Our 2020 plan is structured to be self-funded, liquids heavy, and infrastructure light.  The one-rig program will be roughly 75% directed to a diverse set of intervals in the Northern Delaware area, and provides flexibility to reallocate activity based on results.  Overall, our ample liquidity, nearly $30 per boe cash margins, and hedge book covering 80% of forecasted oil production bolster an investment year with potentially the highest capital efficiency in our Company’s history.”

“Our fourth quarter activities in the North have been focused on adding 5 DUCs while completing a spacing test for two wells in the Wolfcamp B.  These wells recently began flowback and we are encouraged because the pressure data and oil rates are tracking above historical analogs.  In the South, we’re currently completing a two-mile lateral that incorporates our latest geo-mechanical views on landing targets and completion design and will utilize tracer surveys to differentiate flowrate performance among frac intervals.  We expect first production from this well after the New Year.  We are excited about what these recent wells could mean for our future development plans and look forward to providing additional results in the coming months.”

2020 Guidance

Rosehill’s projections for the upcoming year ending December 31, 2020 are provided below.  The 2020 guidance assumes the Company will utilize, on average, a one rig drilling program. The Company expects to drill between 20 and 24 wells in 2020 and complete between 22 and 26 wells.  Approximately 75% of the program is expected to be directed towards the Northern Delaware area with the remainder in the Southern Delaware area.

Item 2020 Guidance
Production (BOEPD) 19,500 – 21,500
Oil / Gas / NGL % 70% / 15% / 15%
LOE (1) ($/BOE) $4.50 – $5.50
Gathering & Transportation ($/BOE) $0.50 – $1.00
Production and Ad Valorem Taxes (% of Revenue (2)) 5.25% – 6.25%
Cash G&A ($/BOE) $3.75 – $4.50
Capital Expenditures (3) (MM) $155 – $175
 
(1)Beginning with reporting for the year ended December 31, 2019, the Company currently expects to classify ad valorem taxes with production taxes on its Consolidated Statement of Operations.  Through the period ending September 30, 2019, ad valorem taxes were classified within lease operating expenses, and totaled $0.46 per BOE for the nine months then ended. 
(2)Excludes derivative settlements.
(3)Approximately 90% of total capital is drilling and completion with remainder consisting primarily of facilities capital.

Commodity Hedging

Included below is a summary of the Company’s derivative contracts as of December 16, 2019.

2020 2021 2022
Oil:
Notional volume (Bbls) (1)(2) 1,000,000
Weighted average fixed price ($/Bbl) $ 67.69 $ $
Natural gas:
Notional volume (MMBtu) 1,970,368 1,615,792 1,276,142
Weighted average fixed price ($/MMbtu) $ 2.75 $ 2.79 $ 2.85
 
Oil Derivative three-way collars (1)(2):
Notional volume (Bbls) 3,294,000 4,200,000 2,000,000
Weighted average ceiling price ($/Bbl) $ 70.29 $ 65.92 $ 65.80
Weighted average floor price ($/Bbl) $ 57.50 $ 60.01 $ 59.35
Weighted average sold put option price ($/Bbl) $ 47.50 $ 39.99 $ 40.65
Midland / Cushing:
Notional volume (Bbls) 5,254,000 4,200,000 2,100,000
Weighted average fixed price ($/Bbl) $ (0.83 ) $ 0.49 $ 0.54
WTI Roll:
Notional volume (Bbls) 2,100,000
Weighted average fixed price ($/Bbl) $ 0.43 $ $
EP Permian:
Notional volume (MMBtu) 2,096,160
Weighted average fixed price ($/MMBtu) $ (1.03 ) $ $
Interest Rate Swaps (3):
Notional principal (In thousands) $ 150,000 $ 150,000 $ 150,000
Average fixed rate 1.721 % 1.721 % 1.721 %
(1) During the second quarter of 2019, the Company entered into commodity derivative swaps where it bought 2,160,000 barrels of crude oil at a weighted average fixed price of $50.48 per barrel to offset commodity derivative swaps it previously sold of 2,160,000 barrels of crude oil at a weighted average fixed price of $61.21 per barrel, effectively locking in a gain of approximately $23.2 million that the Company expects to recognize in 2021 when the swaps settle.
(2) During the second quarter of 2019, the Company entered into commodity derivative swaps where it bought 1,100,000 barrels of crude oil at a weighted average fixed price of $50.55 per barrel to offset commodity derivative swaps it previously sold of 1,100,000 barrels of crude oil at a weighted average fixed price of $58.42 per barrel, effectively locking in a gain of approximately $8.7 million that the Company expects to recognize in 2022 when the swaps settle.
(3) Terminates in August 2022.

About Rosehill Resources Inc.

Rosehill Resources Inc. is an independent oil and gas exploration company with assets positioned in the Delaware Basin portion of the Permian Basin. The Company’s strategy includes the focused development of its multi-bench assets in the Northern Delaware Basin and the Southern Delaware Basin, as well as adding economic drilling inventory to support future growth.

Forward-Looking Statements

This communication includes certain statements that may constitute “forward-looking statements” for purposes of the federal securities laws. All statements, other than statements of historical fact included in this communication, regarding Rosehill’s opportunities in the Delaware Basin, including inventory potential within the Wolfcamp B interval, strategy, future operations, expected drilling and completions activity, financial position, estimated results of operations, future earnings, future capital spending plans, expected gains from settling derivatives, prospects, plans and objectives of management are forward-looking statements. When used in this communication, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “guidance,” “forecast” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

You should not place undue reliance on these forward-looking statements. Although the Company believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements in this communication are reasonable, no assurance can be given that these plans, intentions or expectations will be achieved or occur, and actual results could differ materially and adversely from those anticipated or implied by the forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to, the Company’s ability to realize the anticipated benefits of its drilling and completion activities, commodity price volatility, inflation, lack of availability of drilling and completion equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating oil and natural gas reserves and in projecting future rates of production, cash flow and access to capital, the timing of development expenditures and the other  risks and uncertainties discussed under the section titled “Risk Factors” in the Company’s Form 10-K, and in other public filings with the Securities and Exchange Commission (the “SEC”) by the Company. The Company’s SEC filings are available publicly on the SEC’s website at www.sec.gov. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. All forward-looking statements speak only as of the date of this communication.  Except as otherwise required by applicable law, the Company disclaims 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 communication.

Contact Information:

David L. French Craig Owen
President and Chief Executive Officer Senior Vice President and Chief Financial Officer
281-675-3400 281-675-3400
John Crain
Director of Investor Relations
281-675-3493


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