August 8, 2019 - 6:45 AM EDT
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Riviera Resources Reports Second-Quarter 2019 Results

HOUSTON, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Riviera Resources, Inc. (OTCQX: RVRA) (“Riviera” or the “Company”) and its wholly owned subsidiary, Blue Mountain Midstream LLC (“Blue Mountain”) announces financial and operating results for the second quarter 2019 and provides a strategic update.

The Company highlights the following accomplishments:

  • Increased previously announced $100 million share repurchase authorization to a total of $150 million
  • Returned over $140 million of capital to shareholders through share repurchases and tender offer since the beginning of the year, and over $290 million in the last twelve months
  • Closed the sale of certain non-operated properties located in the Hugoton Basin for proceeds of approximately $31 million, and Michigan assets for proceeds of approximately $39 million, both at a premium to PDP PV-10 value
  • Ended the second quarter with a consolidated cash balance of ~$80 million and $33.5 million drawn on the Blue Mountain Credit Facility

Blue Mountain highlights:

  • Continued its ongoing engagement with Tudor, Pickering, Holt & Co. to review strategic alternatives to unlock unrealized value
  • Executed crude oil gathering agreement with Roan Resources, Inc.
  • Initiated water management services and moved approximately 5.1 million barrels in the second quarter
  • Acquired 100% interests in Lumen Midstream Partnership, LLC in August 2019, for a total investment of less than $5 million

Riviera Upstream highlights:

  • Outperformed second quarter upstream guidance, as provided in our May 2019 earnings release, with respect to Adjusted EBITDAX and production, on lower capital spending
  • Drilled and completed 6 NW STACK operated wells and 2 North Louisiana operated wells in the first half of 2019 with excellent results

David Rottino, Riviera’s President and Chief Executive Officer, commented, “I am very pleased with Riviera’s performance in the second quarter. Operationally, our base assets outperformed original guidance and our drilling program focused in the Northwest STACK and North Louisiana looks very encouraging. 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.  So far this year, we monetized our Arkoma and Michigan assets, a portion of our helium reserves, and our interests in certain non-operated assets in the Hugoton Basin. Additionally, we returned over $140 million of capital to shareholders through our ongoing share repurchase program and recently completed tender offer. Furthermore, the Board authorized an increase to the previously announced $100 million share repurchase program to a total of $150 million.  Finally, we continue to grow our exciting Blue Mountain midstream business, and recently announced the execution of a new crude oil gathering agreement with Roan Resources, expanding and diversifying their service offerings, as well as better positioning it towards a value enhancing transaction.”

Key Financial Results (1)

 Three Months Ended Six Months Ended
 June 30, June 30,
$ in millions20192018 20192018
Average daily production (MMcfe/d)286312 275356
Total oil, natural gas and NGL revenues$ 67$ 87 $ 143$ 224
(Loss) income from continuing operations$ (7)$ 9 $ 6$ 44
(Loss) income from discontinued operations, net of income taxes$ ­­-$ (2) $ ­­-$ 34
Net (loss) income$ (7)$ 7 $ 6$ 78
Adjusted EBITDAX (a non-GAAP financial measure) (2)$ 35$ 11 $ 64$ 51
Net cash provided by operating activities$ 21$ 6 $ 59$ 57
Oil and natural gas capital$ 16$ 7 $ 54$ 17
Total capital$ 41$ 42 $ 102$ 109


(1)All amounts reflect continuing operations with the exception of net income for the three months and six months ended June 30, 2018, respectively.
(2)Includes severance costs of approximately $14 million and $18 million for the three months and six months ended June 30, 2018, respectively.

Strategic Update 
The Company’s Board of Directors (the “Board”) and management believe the Company is trading at a significant discount to its sum-of-the-parts net asset value. The Company has engaged Tudor, Pickering, Holt & Co. to assist in the review and execution of strategic alternatives for Blue Mountain through a value enhancing transaction. Furthermore, the Company will continue to return capital to shareholders through free cash flow generated from efficiently managing our assets, and by opportunistically monetizing additional assets.

Opportunistic Asset Monetizations
Thus far in 2019, the Company has closed four transactions that in combination generated proceeds of approximately $216 million.  The proceeds from the four deals are at a premium to the PDP PV-10 value. The four transactions include the sale of the Arkoma Basin assets (closed January 2019), the sale of certain non-operated properties located in the Hugoton Basin (closed May 2019), the sale of properties located in Michigan (closed July 2019), and the monetization of a portion of the Company’s helium reserves in the Hugoton Basin utilizing a VPP structure (closed March 2019).

The Company has also signed definitive agreements to sell its interest in properties located in Illinois, and certain non-core properties located in North Louisiana that are expected to close in Q3 2019, that in combination are expected to generate estimated proceeds of approximately $7 million.

Successful Tender Offer
The Company continues to focus on enhancing shareholder value and finding ways to return capital to its shareholders. On June 13, 2019, it announced the intention to commence a tender offer to purchase $40 million of the Company’s common stock. The tender offer was completed on July 16, 2019. The Company repurchased an aggregate of 2,666,666 shares of common stock at a price of $15.00 per share for a total cost of approximately $40 million (excluding expenses of the tender offer). The shares acquired represented approximately 4% of the Company’s outstanding shares as of June 13, 2019.

Continuation of Share Repurchase Plan
On August 16, 2018, the Board authorized the repurchase of up to $100 million of the Company’s outstanding shares of common stock. Through June 2019, the Company repurchased an aggregate of 6,589,110 shares at an average price of $14.56 for a total cost of approximately $96 million. In the second quarter alone the Company bought back 3,147,156 shares at an average price of $13.76 for a total cost of approximately $43 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 June 13, 2019 announcement of the intent to commence a tender offer as discussed above.

The Company expects to continue repurchasing shares, and on July 18, 2019 announced that the Board authorized an increase to the previously announced $100 million share repurchase program to a total of up to $150 million. Subsequent to July 18, 2019, the Company repurchased an aggregate of 2,122,478 shares of common stock for a total cost of approximately $22 million. As of August 7, 2019, approximately $32 million was available for share repurchase under the program.

Second Quarter 2019 Activity – Upstream Assets
Riviera’s production for the second quarter averaged approximately 286 MMcfe/d, which exceeds the high end of our original guidance range. The outperformance in production is mainly due to the outperformance of our NW STACK and North Louisiana drilling programs.

With respect to costs, the Company had strong results in the second quarter. Upstream capital expenditures were approximately $17 million compared to original guidance of $19 million. Adjusted G&A expenses were approximately $7 million. Operating expenses were approximately $44 million, 8% below the mid-point of our original guidance for the quarter, primarily driven by a non-recurring net refund of Texas sales and use tax of approximately $4 million.

Northwest STACK / North Louisiana Operated Drilling Program
Riviera’s operated NW STACK drilling program progressed on schedule with the Company turning to production 3 operated wells in the second quarter, for a total of 6 operated wells turned to production year to date.  The average IP30 rate of the 6 operated wells is approximately 670 boepd with 55% oil and 72% liquids.  All of these wells are single mile laterals with a target capital cost of $4.9 million to $5.2 million, which is expected to generate a 30% to 40% IRR. 

The Company completed a two well pad in North Louisiana late in the first quarter.  These wells achieved a choke restricted average IP30 of approximately 20 MMcfe/d.  The expected IRR of these wells is over 100% and payback is expected in less than 12 months. 

Blue Mountain Business Update 
On average for the second quarter of 2019, natural gas throughput was 120 MMcf/d and Natural Gas Liquids (“NGLs”) produced were 10,590 bpd, a 92% increase as compared to the second quarter of 2018 at 62 MMcf/d and a 2% increase compared with the first quarter of 2019 at 117 MMcf/d. During the second quarter, five wells were turned to sales on our system; however, throughput volumes were slightly impacted as our primary customer temporarily shut-in five wells due to hydraulic fracturing of neighboring wells. Throughput volumes are expected to increase during the remainder of 2019 based on the current well attachment schedules provided by our customers. On August 5, 2019, Blue Mountain acquired 100% interests in Lumen Midstream Partnership, LLC, including approximately 55 miles of natural gas gathering pipelines and an 18 MMcf/d processing plant. The Lumen system will be interconnected to the Blue Mountain system for a total investment of less than $5 million. “The acquisition of the Lumen assets will secure over 15 customers, reroute volumes to our Cryo I plant by the fourth quarter and extend our reach into the Merge for our three gathering service options,” commented Greg Harper, President and CEO of Blue Mountain.

On April 1, 2019, Blue Mountain began providing water management services for Roan Resources. During the second quarter, the company hauled 5.1 million barrels of water in total, averaging 56,100 bpd, for Roan Resources and a third-party customer. In addition, during the quarter, Blue Mountain made significant progress in the construction of its water gathering system, with first pipeline connections in service in July. Also, Blue Mountain acquired the land and permits for two of its future owned and operated saltwater disposal wells and expects completion of at least one well by the end of the third quarter of 2019. 

During the second quarter of 2019, Blue Mountain was impacted by overall lower commodity prices, including a 20% reduction in the weighted average barrel NGL price from the first quarter of 2019.  Despite this major challenge, Blue Mountain’s second quarter Adjusted EBITDA decreased by only $1 million compared with first quarter results, benefited by the new fee-based water margins and steady gas throughput volumes. In the second quarter of 2019, the business continued to be impacted by the NGL pricing differentials at Conway and Mont Belvieu. The elimination of the basis exposure would have added $0.7 million to Blue Mountain’s margin. Management has hedged a material portion of its exposure to the NGL pricing differentials at Conway and Mont Belvieu for 2019 and expects to eliminate all basis dislocation by the first quarter of 2020 when ONEOK’s Arbuckle II Pipeline is completed.

Capital expenditures for the second quarter were approximately $24 million, with the majority of capital being invested in the construction of water gathering pipelines. 

Harper added, “I’m very pleased with Blue Mountain’s performance over the quarter. Our water business is off to a solid start, and we have made significant strides in diversifying our revenue stream going forward with the addition of crude oil gathering. As our water business becomes established moving to our piped system coupled with our recently announced crude oil gathering system, and with Roan’s projected volume ramp during the second half of 2019, I’m excited about our momentum becoming a top tier midstream enterprise as we move towards 2020.”

Balance Sheet and Liquidity
Riviera and Blue Mountain have established separate credit facilities. As of June 30, 2019, there were no borrowings outstanding on Riviera’s revolving credit facility, and borrowing commitments of up to $245 million with available borrowing capacity of approximately $211 million, inclusive of outstanding letters of credit. In July 2019, Riviera’s borrowing base was reduced to $230 million due to the sale of its properties located in Michigan, with available borrowing capacity of approximately $197 million, inclusive of outstanding letters of credit.

As of June 30, 2019, Blue Mountain had approximately $33.5 million drawn on its revolving credit facility, and borrowing commitments of up to $200 million with available borrowing capacity of approximately $155 million, including outstanding letters of credit, subject to covenant restrictions in the Blue Mountain Credit Facility.

Second Quarter Actuals
Below is a summary of the Company’s consolidated second quarter results.

 Q2 2019
Actuals
Q2 2019
Actuals
Q2 2019
Actuals
 Upstream Blue Mountain Consolidated
    
Net Production (MMcfe/d)286 286
Natural gas (MMcf/d)236 236
Oil (Bbls/d)1,933 1,933
NGL (Bbls/d)6,363 6,363
    
Other revenues, net (in thousands) (1)$ 8,064 (2)$ 11,668 (3)$ 19,732 (4)
Helium revenues$ 4,810 (5) $ 4,810 (5)
Jayhawk / Other$ 3,254 $ 3,254
Blue Mountain $ 11,668 (3)$ 11,668(3)
    
Costs (in thousands)$ 43,789$ 708$ 44,497
Lease operating expenses$ 23,845 $ 23,845
Transportation expenses$ 18,053 $ 18,053
Taxes, other than income taxes$ 1,891 (6)$ 708$ 2,599 (6)
    
Adjusted general and administrative expenses (Non-GAAP) (7)$ 6,990 (8)$ 2,875 (9)$ 9,865 (10)
    
Targets (in thousands)   
Adjusted EBITDAX (Non-GAAP)$ 28,761$ 5,887$ 34,648
Cash interest expense (Non-GAAP) (11)$ 999$ 229$ 1,228
Oil and natural gas capital$ 16,054 $ 16,054
Total capital$ 17,291$ 23,539$ 40,830
    


(1)Includes other revenues and margin on marketing activities 
(2)Includes other revenues of approximately $5.2 million, plus marketing revenues of approximately $10.7 million, less marketing expenses of approximately $7.8 million for the three months ended June 30, 2019
(3)Includes marketing revenues of approximately $42.6 million, less adjusted marketing expenses of approximately $30.9 million. Adjusted marketing expenses is a non-GAAP measure that excludes share-based compensation expenses of less than $0.1 million
(4)Includes other revenues of approximately $5.2 million, plus marketing revenues of approximately $53.3 million, less adjusted marketing expenses of approximately $38.8 million. Adjusted marketing expenses is a non-GAAP measure that excludes share-based compensation expenses of less than $0.1 million and losses on derivatives of approximately $2.9 million
(5)Includes helium revenues from the VPP Interests of approximately $3.7 million
(6)Includes a reduction to taxes, other than income taxes costs for non-recurring refund of Texas sales and use tax, net of professional service claim fees, of approximately $4.4 million
(7)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
(8)For the three months ended June 30, 2019 represents general and administrative expenses of approximately $8.8 million, excluding share-based compensation expenses of approximately $1.8 million
(9)For the three months ended June 30, 2019 represents general and administrative expenses of approximately $4.7 million, excluding share-based compensation expenses of approximately $1.8 million
(10)For the three months ended June 30, 2019 represents general and administrative expenses of approximately $13.5 million, excluding share-based compensation expenses of approximately $3.6 million
(11)Excludes non cash amortization
  

Upstream Segment - Second Quarter Actuals versus Guidance
The comparison to guidance below is for the upstream assets only. The Company did not provide second quarter 2019 guidance for Blue Mountain.

 Q2 2019
Actuals
Original Guidance (1)
Q2 2019E
Updated Guidance (1)
Q2 2019E
    
Net Production (MMcfe/d)286255 – 285280 – 290
Natural gas (MMcf/d)236210 – 235230 – 240
Oil (Bbls/d)1,9331,600 – 1,8501,875 – 2,000
NGL (Bbls/d)6,3635,900 – 6,5006,300 – 6,400
    
Other revenues, net (in thousands) (2)$ 8,064 (3)$ 5,500 - $ 7,500$ 7,000 –  $ 8,500
Helium revenues$ 4,810 (4)$ 4,500 – $ 5,500 (4)$ 4,500 –  $ 5,000 (4)
Jayhawk / Other$ 3,254$ 1,000 – $ 2,000$ 2,500 –  $ 3,500
    
Costs (in thousands)$ 43,789$ 45,000 – $ 50,000$ 42,000 – $ 46,000
Lease operating expenses$ 23,845$ 23,000 – $ 25,000$ 23,000 –  $ 25,000
Transportation expenses$ 18,053$ 17,000 – $ 18,000$ 17,500 –  $ 18,500
Taxes, other than income taxes$ 1,891 (5)$ 5,000 – $ 7,000$ 1,500 – $ 2,500 (4)
    
Adjusted general and administrative expenses (Non-GAAP) (6)$ 6,990 (7)$ 7,500 – $ 9,000$ 6,500 – $ 7,500
    
Targets (Mid-Point) (in thousands)   
Adjusted EBITDAX (Non-GAAP)$ 28,761$ 23,000$ 25,000 –  $ 30,000
VPP Notes interest expense (8)$ 1,045$ 1,000$ 1,050
VPP Notes principal$ 2,649$ 3,000$ 2,650
Capital expenditures$ 17,291$ 19,000$ 17,500
    


(1)Original guidance estimates provided in May 9, 2019 first quarter earnings release; updated guidance provided in July 9, 2019 press release
(2)Includes other revenues and margin on marketing activities 
(3)Includes other revenues of approximately $5.2 million, plus marketing revenues of approximately $10.7 million, less marketing expenses of approximately $7.8 million for the three months ended June 30, 2019
(4)Includes helium revenues from the VPP Interests of approximately $3.7 million
(5)Includes a reduction to taxes, other than income taxes costs for non-recurring refund of Texas sales and use tax, net of professional service claim fees, of approximately $4.4 million
(6)Adjusted general and administrative expenses is a non-GAAP measure that excludes share-based compensation expenses and severance expenses presented for the purpose of comparing to guidance
(7)For the three months ended June 30, 2019 represents general and administrative expenses of approximately $8.8 million, excluding share-based compensation expenses of approximately $1.8 million
(8)Excludes non cash amortization
  

Upstream Segment - Third Quarter and Full Year 2019 Guidance
The guidance below is for the upstream assets only. Guidance estimates have been adjusted for the sale of properties located in Michigan that closed July 3, 2019, and the sales of Illinois assets and non-core North Louisiana properties that are expected to close in the third quarter. 2019 guidance estimates include the Adjusted EBITDAX from the Helium VPP transaction that closed in March, 2019.

 Q3 2019EFY 2019E
   
Net Production (MMcfe/d)233 – 255240 – 270
Natural gas (MMcf/d)185 – 205195 – 220
Oil (Bbls/d)1,900 – 2,1001,500 – 1,800
NGL (Bbls/d)6,000 – 6,3006,000 – 6,500
   
Other revenues, net (in thousands) (1)$ 7,000 - $ 9,000$ 36,000 –  $ 40,000
Helium revenues$ 4,500 – $ 5,500 (2)$ 20,000 –  $ 22,000 (3)
Jayhawk / Other$ 2,500 – $ 3,500$ 16,000 –  $ 18,000
   
Costs (in thousands)$ 36,500 – $ 41,500$ 165,000 – $ 175,000
Lease operating expenses$ 17,000 – $ 19,000$ 81,000 –  $ 85,000
Transportation expenses$ 16,000 – $ 17,000$ 68,000 –  $ 72,000
Taxes, other than income taxes$ 3,500 – $ 5,500$ 16,000 – $ 18,000
   
Adjusted general and administrative expenses (Non-GAAP) (4), (6)$ 8,500 – $ 9,500$ 32,000 – $ 35,000
General and administrative- severance expenses$ 1,500 - $ 2,000$ 1,500 - $ 2,000
   
Costs per Mcfe (Mid-Point)$ 1.75$ 1.82
Lease operating expenses$ 0.80$ 0.89
Transportation expenses$ 0.74$ 0.75
Taxes, other than income taxes$ 0.21$ 0.18
   
Targets (Mid-Point in thousands)  
Adjusted EBITDAX (Non-GAAP) (5), (6)$ 19,000$ 91,000
Capital expenditures$ 9,000$ 68,000
VPP Notes interest expense payments$ 1,000$ 3,000
VPP Notes principal payments$ 2,700$ 8,000
   
Weighted Average NYMEX Differentials  
Natural gas (MMBtu)($ 0.55) – ($ 0.40)($ 0.40) – ($ 0.30)
Oil (Bbl)($ 2.40) – ($ 1.40)($ 1.70) – ($ 1.10)
NGL price as a % of crude oil price24% – 30%28% – 34%


Unhedged Commodity Price AssumptionsJul 19Aug 19Sep 192019E
Natural gas (MMBtu)$2.29$2.22$2.20$2.59
Oil (Bbl)$57.75$55.88$55.88$56.82
NGL (Bbl)$15.34$14.86$14.83$17.79


(1)Includes other revenues and margin on marketing activities for Upstream assets, only
(2)Includes helium revenues from the VPP Interests of approximately $3.7 million
(3)Includes helium revenues from the VPP Interests of approximately $14.6 million
(4)Excludes share-based compensation expenses and severance expenses
(5)Includes severance expenses of approximately $1.8 million
(6)The Company does not provide a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures on a forward-looking basis as it is unable to forecast certain items that we have defined as "Selected Items Impacting Comparability", which items are set forth later in this press release under the heading “Non-GAAP Financial Measures and Selected Items Impacting Comparability, without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of and the periods in which such items may be recognized. Thus, a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures could result in disclosure that could be imprecise or potentially misleading. These items could be material to and have a significant impact on the Company’s results computed in accordance with GAAP.


Hedging Update

Riviera Upstream Hedges

 20192020
Natural GasVolume
(MMMBtu/d)
Average Price
(per MMBtu)
Volume
(MMMBtu/d)
Average Price
(per MMBtu)
Swaps141$2.8830$ 2.82
Collars20$2.75 - $3.00-$ -
OilVolume
(Bbls/d)
Average Price
(per Bbl)
Volume
(Bbls/d)
Average Price
(per Bbl)
Swaps1,000$64.32500$64.63
Natural Gas Basis Differential positionsVolume
(MMMBtu/d)
Average Price
(per MMBtu)
Volume
(MMMBtu/d)
Average Price
(per MMBtu)
PEPL Basis Swaps70($0.64)20($ 0.45)
NWPL Basis Swaps10($0.61)-$ -

Blue Mountain Hedges

 2019
Natural GasVolume
(MMMBtu/d)
Average Price
(per MMBtu)
Swaps15$ 2.81
OilVolume
(Bbls/d)
Average Price
(per Bbl)
Swaps98$ 66.60
Natural Gas Basis Differential positionsVolume
(MMMBtu/d)
Average Price
(per MMBtu)
Southern Star Basis Swaps5($ 0.57)
Enable Basis Swaps5($ 0.23)


NGL Positions:2019
Fixed price swap (Mont Belvieu ethane): 
Hedged volume (gallons/d in thousands)126
Average price ($/gallon)$ 0.34
Fixed price swap (Mont Belvieu propane): 
Hedged volume (gallons/d in thousands)42
Average price ($/gallon)$ 0.68
Margin spread (Mont Belvieu propane and Conway propane): 
Hedged volume (gallons/d in thousands)63
Average price ($/gallon)($ 0.07)
Margin spread (Mont Belvieu pentane and Conway pentane): 
Hedged volume (gallons/d in thousands)63
Average price ($/gallon)($ 0.09)
 

Earnings Call / Form 10‑Q
The Company will host a conference call Thursday, August 8, 2019 at 10:00 a.m. (Central) to discuss the Company’s second quarter 2019 results and expects to file its second quarter Form 10-Q with the Securities and Exchange Commission on or around that date. There will be prepared remarks by executive management followed by a question and answer session.

Investors and analysts are invited to participate in the call by dialing (866) 416-7462, or (409) 217-8223 for international calls using Conference ID: 5655538. 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

Riviera Resources Conference Attendance
Riviera Resources announces that members of senior management will be available for one-on-one meetings with investors in New Orleans at the Johnson Rice 2019 Energy Conference on September 25, 2019.

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, the Uinta Basin and Mid-Continent regions. Riviera also owns Blue Mountain Midstream LLC, a midstream company centered in the core of the Merge play in the Anadarko Basin.

Non-GAAP Financial Measures and Selected Items Impacting Comparability
To supplement our financial information presented in accordance with GAAP, management uses additional measures known as "non-GAAP financial measures" in its evaluation of past performance and prospects for the future. The primary additional measures used by management are earnings before interest, taxes, depreciation and amortization, exploration costs, noncash gains and losses on commodity derivatives, accrued settlements on commodity derivative contracts related to current production period, share-based compensation expenses, gains and losses on asset sales, reorganization items, and asset impairments (“Adjusted EBITDAX”) and earnings before interest, taxes, depreciation and amortization, noncash gains and losses on commodity derivatives, accrued settlements on commodity derivative contracts related to current production period, share-based compensation expenses, gains and losses on asset sales, and asset impairments (“Adjusted EBITDA”). Management believes these non-GAAP financial measures provide useful information to investors because these non-GAAP measures, when viewed with the Company’s GAAP results and accompanying reconciliations, provide a more complete understanding of the Company’s performance than GAAP results alone.

Forward-Looking Statements
Statements made in this press release that are not historical facts are “forward-looking statements.” These statements are based on certain assumptions and expectations made by the Company which reflect management’s experience, estimates and perception of historical trends, current conditions, and anticipated future developments. These statements include, among others, statements regarding our 2019 guidance, planned capital expenditures, increases in oil and gas production, the number of anticipated wells to be drilled or completed after the date hereof, future cash flows and borrowings, our strategic objectives with respect to Blue Mountain Midstream, our financial position, business strategy and other plans and objectives for future operations.  Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or anticipated in the forward-looking statements. These include risks relating to the Company’s financial and operational performance and results, low or declining commodity prices and demand for oil, natural gas and natural gas liquids, ability to hedge future production, ability to replace reserves and efficiently develop current reserves, the capacity and utilization of midstream facilities and the regulatory environment. These and other important factors could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Please read “Risk Factors” in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.

CONTACT:
Investor Relations
(281) 840-4168
[email protected]

 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 June 30,
2019 
  December 31,
2018 
 
 (in thousands)
  (in thousands)
 
ASSETS       
Current assets:       
Cash and cash equivalents$80,229  $18,529 
Accounts receivable – trade, net 82,218   114,489 
Derivative instruments 18,447   10,758 
Restricted cash 26,457   31,248 
Other current assets 14,638   26,721 
Assets held for sale 49,090   38,396 
Total current assets 271,079   240,141 
Noncurrent assets:       
Oil and natural gas properties (successful efforts method) 692,815   756,552 
Less accumulated depletion and amortization (101,033)  (93,507)
  591,782   663,045 
        
Other property and equipment 646,425   606,244 
Less accumulated depreciation (79,275)  (62,368)
  567,150   543,876 
        
Derivative instruments 2,048   4,603 
Deferred income taxes 126,646   129,091 
Other noncurrent assets 7,389   12,078 
  136,083   145,772 
Total noncurrent assets 1,295,015   1,352,693 
Total assets$1,566,094  $1,592,834 
LIABILITIES AND EQUITY       
Current liabilities:       
Accounts payable and accrued expenses$122,188  $159,228 
Derivative instruments 5,471   4,719 
Current portion of Mayzure notes payable 10,693    
Other accrued liabilities 24,656   34,474 
Liabilities held for sale 10,303   3,725 
Total current liabilities 173,311   202,146 
Noncurrent liabilities:       
Derivative instruments 166    
Mayzure notes payable, net 65,841    
Credit facilities 33,500   24,500 
Asset retirement obligations 91,480   103,814 
Other noncurrent liabilities 9,630    
Total noncurrent liabilities 200,617   128,314 
Equity:       
Preferred Stock     
Common Stock 636   692 
Additional paid-in capital 1,180,528   1,256,730 
Retained earnings 11,002   4,952 
Total equity 1,192,166   1,262,374 
Total liabilities and equity$1,566,094  $1,592,834 
 


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(Unaudited)
 Three Months Ended
June 30,

  Six Months Ended
June 30,

 
 2019
  2018
  2019
  2018
 
  
 (in thousands, except per share amounts)
Revenues and other:               
Oil, natural gas and natural gas liquids sales$66,757  $87,004  $143,102  $223,880 
Gains (losses) on commodity derivatives 20,249   (7,525)  7,008   (22,555)
Marketing revenues 53,394   42,967   120,741   89,234 
Other revenues 5,150   6,387   11,153   12,281 
  145,550   128,833   282,004   302,840 
Expenses:               
Lease operating expenses 23,845   24,088   47,897   71,972 
Transportation expenses 18,053   21,213   37,203   40,307 
Marketing expenses 41,811   40,327   95,200   82,082 
General and administrative expenses 13,489   92,395   32,480   137,174 
Exploration costs 969   53   2,207   1,255 
Depreciation, depletion and amortization 23,181   21,980   44,953   50,445 
Impairment of assets held for sale 18,390      18,390    
Taxes, other than income taxes 2,599   7,115   8,899   15,567 
Losses (gains) on sale of assets and other, net 9,885   (101,934)  (17,380)  (208,230)
  152,174   105,237   269,849   190,572 
Other income and (expenses):               
Interest expense, net of amounts capitalized (2,103)  (584)  (3,074)  (988)
Other, net 476   538   (113)  368 
  (1,627)  (46)  (3,187)  (620)
Reorganization items, net (424)  (1,259)  (472)  (3,210)
(Loss) income from continuing operations before income taxes (8,723)  22,291   8,496   108,438 
Income tax (benefit) expense (2,047)  13,336   2,446   64,875 
(Loss) income from continuing operations (6,676)  8,955   6,050   43,563 
Income (loss) from discontinued operations, net of income taxes    (1,758)     34,573 
Net (loss) income$(6,676) $7,197  $6,050  $78,136 
Income (loss) per share:               
(Loss) income from continuing operations per share ‒ Basic$(0.10) $0.11  $0.09  $0.58 
(Loss) income from continuing operations per share ‒ Diluted$(0.10) $0.11  $0.09  $0.58 
                
Income (loss) from discontinued operations per share ‒ Basic$  $(0.02) $  $0.45 
Income (loss) from discontinued operations per share ‒ Diluted$  $(0.02) $  $0.45 
                
Net (loss) income per share ‒ Basic$(0.10) $0.09  $0.09  $1.03 
Net (loss) income per share ‒ Diluted$(0.10) $0.09  $0.09  $1.03 
                
Weighted average shares outstanding ‒ Basic 65,005   76,191   66,900   76,191 
Weighted average shares outstanding ‒ Diluted 65,089   76,191   67,079   76,191 
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 
 
 Six Months Ended June 30,
 2019
  2018
 
  
 (in thousands)
Cash flow from operating activities:       
Net income$6,050  $78,136 
Adjustments to reconcile net income to net cash provided by operating activities:       
Income from discontinued operations    (34,573)
Depreciation, depletion and amortization 44,953   50,445 
Impairment of assets held for sale 18,390    
Deferred income taxes 2,446   65,010 
Total (gains) losses on derivatives, net (2,047)  22,555 
Cash settlements on derivatives (2,169)  (25,037)
Share-based compensation expenses 7,885   66,374 
Gains on sale of assets and other, net (19,631)  (209,635)
Other 4,220   2,008 
Changes in assets and liabilities:       
Decrease in accounts receivable – trade, net 28,361   76,465 
Decrease in other assets 10,901   33,654 
Decrease in accounts payable and accrued expenses (32,119)  (52,538)
Decrease in other liabilities (8,439)  (15,815)
Net cash provided by operating activities 58,801   57,049 
Cash flow from investing activities:       
Development of oil and natural gas properties (56,078)  (45,938)
Purchases of other property and equipment (48,597)  (87,377)
Proceeds from sale of properties and equipment and other 95,291   369,489 
Net cash (used in) provided by investing activities (9,384)  236,174 
Cash flow from financing activities:       
Net transfers to Parent    (456,925)
Repurchases of shares (77,744)   
Proceeds from borrowings 115,225    
Repayments of debt (26,949)   
Debt issuance costs paid (3,040)   
Distributions to unitholders    (12,174)
Other    (294)
Net cash provided by (used in) financing activities 7,492   (469,393)
Net increase (decrease) in cash, cash equivalents and restricted cash 56,909   (176,170)
Cash, cash equivalents and restricted cash:       
Beginning 49,777   520,922 
Ending$106,686  $344,752 
 

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 June 30,
  Six Months Ended June 30,
 
 2019
 2018 
  2019   2018 
 
   
 (in thousands) 
Net (loss) income$(6,676) $7,197  $6,050  $78,136 
Plus (less):              
Loss (income) from discontinued operations   1,758      (34,573)
Interest expense, net of amounts capitalized 2,103  584   3,074   988 
Income tax (benefit) expense (2,047)  13,336   2,446   64,875 
Depreciation, depletion and amortization 23,181  21,980   44,953   50,445 
Exploration costs 969  53   2,207   1,255 
EBITDAX 17,530  44,908   58,730   161,126 
Plus (less):              
Noncash (gains) losses on commodity derivatives (14,552)  6,955   (4,216)  17,491 
Accrued settlements on commodity derivative contracts related to current production period (1) (663)  935   (1,028)  1,568 
Share-based compensation expenses 3,680  58,188   9,987   75,225 
Losses (gains) on sale of assets and other, net (2) 9,839  (100,928)  (18,786)  (207,260)
Reorganization items, net (3) 424  1,259   472   3,210 
Impairment of assets held for sale 18,390     18,390    
Adjusted EBITDAX$34,648 $11,317  $63,549  $51,360 


(1) Represent amounts related to commodity derivative contracts that settled during the respective period (contract terms had expired) but cash had not been received as of the end of the period.
(2) Primarily represent gains or losses on the sale of assets, earnings from equity method investments and gains or losses on inventory valuation.
(3) Represent costs and income directly associated with the predecessor’s filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code since the petition date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined.

Adjusted EBITDAX and Adjusted EBITDA (Non-GAAP Measures)

The non-GAAP financial measures of Adjusted EBITDAX and adjusted EBITDA, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Therefore, these non-GAAP measures should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP. Adjusted EBITDAX and Adjusted EBITDA should not be considered in isolation or as a substitute for GAAP.

Adjusted EBITDAX and Adjusted EBITDA are measures used by Company management to evaluate the Company’s operational performance and for comparisons to the Company’s industry peers. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results.

The following presents a reconciliation of net income (loss) to Adjusted EBITDAX and Adjusted EBITDA:

 
 Three Months Ended June 30, 2019
 (in thousands)
 
Consolidated
 Upstream
 Blue
Mountain

         
Net (loss) income$(6,676) $(7,308) $632
Plus (less):        
Interest expense 2,103  1,748  355
Income tax benefit (2,047)  (2,047)  
Depreciation, depletion and amortization 23,181  20,970  2,211
EBITDA 16,561   13,363   3,198
Exploration costs 969  969  
EBITDAX 17,530  14,332  3,198
Plus (less):        
Noncash (gains) losses on commodity derivatives (14,552)  (15,282)  730
Accrued settlements on commodity derivative contracts related to current production period (1) (663)  97  (760)
Share-based compensation expenses 3,680  1,770  1,910
Losses on sale of assets and other, net (2) 9,839  9,030    809
Reorganization items, net (3) 424  424  
Impairment of assets held for sale 18,390  18,390  
Adjusted EBITDAX / Adjusted EBITDA$34,648 $28,761 $5,887


 Six Months Ended June 30, 2019
 (in thousands)
 Consolidated Upstream Blue Mountain
       
Net income (loss)$6,050 $8,487 $(2,437)
Plus (less):      
Interest expense3,074  2,459  615
Income tax expense2,446  2,446  
Depreciation, depletion and amortization 44,953  40,529  4,424
EBITDA56,523   53,921   2,602
Exploration costs 2,207  2,207  
EBITDAX58,730  56,128  2,602
Plus (less):      
Noncash (gains) losses on commodity derivatives(4,216)  (8,665)  4,449
Accrued settlements on commodity derivative contracts related to current production period (1)(1,028)  51  (1,079)
Share-based compensation expenses9,987  4,000  5,987
(Gains) losses on sale of assets and other, net (2)(18,786)  (19,595)  809
Reorganization items, net (3)472  472  
Impairment of assets held for sale 18,390  18,390  
Adjusted EBITDAX / Adjusted EBITDA$63,549 $50,781 $12,768


  
  
  
(1)Represent amounts related to commodity derivative contracts that settled during the respective period (contract terms had expired) but cash had not been received as of the end of the period.
  
  
  
(2)Primarily represent gains or losses on the sale of assets, earnings from equity method investments and gains or losses on inventory valuation.
  
  
  
(3)Represent costs and income directly associated with the predecessor’s filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code since the petition date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments were determined.

 

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Source: GlobeNewswire (August 8, 2019 - 6:45 AM EDT)

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