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RSP Permian, Inc. Announces First Quarter 2018 Financial and Operating Results

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RSP Permian, Inc. ("RSP" or the "Company") (NYSE:RSPP) today reported
financial and operating results for the quarter ended March 31, 2018. In
addition, the Company filed its Quarterly Report on Form 10-Q with the
Securities and Exchange Commission (the "SEC").

Highlights for the First Quarter 2018

  • 1Q18 production increased 39% to 62.8 MBoe/d (72% oil, 87%
    liquids), compared to 1Q17
  • 1Q18 net income was $89.6 million, or $0.57 per diluted share and
    adjusted net income (non-GAAP), which does not include certain items,
    was $79.0 million, or $0.50 per diluted share
  • 1Q18 adjusted EBITDAX (non-GAAP) increased 65% to $205.2 million
    compared to 1Q17, and increased 12% compared to 4Q17
  • Brought in a spot completion crew in late January, replaced by
    third full-time crew in April
    • Completed 31 gross operated wells during the first quarter of 2018
    • Exited the quarter with production exceeding 70 MBoe/d
  • Entered into a definitive merger agreement pursuant to which Concho
    Resources Inc. (NYSE:CXO) ("Concho") will acquire RSP in an all-stock
    transaction valued at approximately $9.5 billion, inclusive of RSP's
    net debt

Adjusted net income and adjusted EBITDAX are non-GAAP measures. See "Use
of Non-GAAP Financial Measures" below for definitions and
reconciliations.

Operational Highlights

Delaware Basin

  • The Boyd 28 11 1H Wolfcamp XY, our furthest south Delaware completion
    to date, established a peak 30-day average rate of 1,526 Boe/d or 324
    Boe/d per 1,000' (71% oil)
  • The State Rudd Draw 26-25-2H Wolfcamp XY well established a peak
    30-day average rate of 2,289 Boe/d or 271 Boe/d per 1,000' (71% oil)
  • The Ludeman 202H 2nd Bone Spring well established a peak 30-day
    average rate of 1,013 Boe/d or 141 Boe/d per 1,000' (73% oil)
  • The Brunson D 3-well pad (1203H Wolfcamp A, 1201H Wolfcamp B and 1204H
    Third Bone Spring) is back online after being shut-in for offset
    operator completion activities and has achieved cumulative production
    of over 390 MBoe in less than 90 days

Midland Basin

  • The Spanish Trail 4825, RSP's first horizontal Jo Mill completion,
    established a peak 15-day average rate of 1,048 Boe/d or 150 Boe/d per
    1,000' (74% oil); this well is still cleaning up and increasing in rate
  • The Parks Bell 3926H Wolfcamp A, another successful extension well on
    the west side of our acreage position, established a peak 30-day
    average rate of 1,440 Boe/d or 205 Boe/d per 1,000' (86% oil)
  • The Woody 3-46 6H, our first Lower Spraberry well on the Woody lease
    in Glasscock County, established a peak 30-day average rate of 1,786
    Boe/d or 236 Boe/d per 1,000' (86% oil)

Steve Gray, Chief Executive Officer of RSP, commented on the results,
"We had a very active quarter, picking up our third completion crew and
completing 31 horizontal wells, the most wells we have completed during
any quarter to date. As a result, we had a steep production ramp as we
exited the first quarter and continuing into April, after experiencing a
significant amount of production downtime in January and February when
we shut-in a number of producing wells to accommodate elevated offset
completion activity. As evidenced by our recent well highlights, we
continue to see compelling well results from both our Delaware and
Midland Basin positions and we are on track to deliver on our production
guidance for the year."

Mr. Gray continued, "We are excited about our pending transaction with
Concho, which creates one of the largest producers in the Permian Basin
with the largest development program. I want to thank our Board,
management team, employees, shareholders, vendors and all of our
partners for the outstanding accomplishments we have achieved together
and express my gratitude for the opportunity to lead this organization."

Proposed Merger with Concho Resources

As previously announced, on March 27, 2018, RSP and Concho entered into
a definitive merger agreement, pursuant to which Concho will acquire RSP
in an all-stock transaction valued at approximately $9.5 billion,
inclusive of RSP's net debt. Stockholders of RSP will receive 0.320
shares of Concho common stock in exchange for each share of RSP's common
stock, representing consideration to each stockholder of RSP of $50.24
per share based on the closing price of Concho common stock on March 27,
2018. The transaction is expected to close in the third quarter of 2018,
subject to the approval of both RSP and Concho stockholders, the
satisfaction of certain regulatory approvals and other customary closing
conditions.

In light of the pending merger with Concho, we do not in general plan to
provide or update guidance and long-term outlook information regarding
our results of operations during the pendency of the merger. In
addition, investors are cautioned not to rely on historical
forward-looking statements regarding guidance and long-term outlook
information, which forward-looking statements spoke only as of the date
provided and were subject to the specific risks and uncertainties that
accompanied such forward-looking statements.

Operational Results

  Three Months Ended March 31,
  2018     2017
Production data:
Oil (MBbls) 4,073 3,032
Natural gas (MMcf) 4,254 2,926
NGLs (MBbls)   868   547
Total (MBoe)   5,650   4,067
Average net daily production (Boe/d)   62,778   45,189
Average prices before effects of hedges (1) (2):
Oil (per Bbl) $ 61.87 $ 50.01
Natural gas (per Mcf) 1.98 2.52
NGLs (per Bbl)   18.33   19.96
Total (per Boe) $ 48.91 $ 41.78
Average realized prices after effects of hedges (1) (2):
Oil (per Bbl) $ 58.50 $ 49.02
Natural gas (per Mcf) 1.98 2.59
NGLs (per Bbl)   18.33   19.96
Total (per Boe) $ 46.48 $ 41.09
Average costs (per Boe):
Lease operating expenses (excluding gathering and transportation) $ 5.44 $ 5.40
Gathering and transportation (2) 0.25 0.85
Production and ad valorem taxes 2.88 2.33
Depreciation, depletion and amortization 13.47 15.01
General and administrative - recurring cash component 1.60 1.91
General and administrative - recurring stock comp (3) 0.94 0.96
 
(1) Average prices shown in the table reflect prices both before and
after the effects of our cash payments/receipts on the Company's
commodity derivative transactions. The calculation of such effects
includes realized gains or losses on cash settlements for commodity
derivative transactions and an adjustment to reflect premiums
incurred previously or upon settlement that are attributable to
instruments settled in the period, if applicable.
(2) Average prices for oil are net of transportation costs. Average
prices for natural gas and NGLs in the first quarter of 2018 were
impacted by the adoption of Accounting Standards Update 2014-09,
Revenue from Contracts with Customers (Topic 606) ("ASC 606"), which
requires certain transportation, gathering, processing and
compression fees paid to the Company's midstream processing entity
to be recorded as a deduction to revenues. Prior to 2018, these fees
were recorded as gathering and transportation which are included in
lease operating expenses.
(3) Represents compensation expense related to restricted stock awards
and performance share awards granted as part of the Company's
compensation and retention programs.
 

Production volumes for the quarter ended March 31, 2018 averaged 62,778
Boe/d, or a total of 5,650 MBoe, an increase of 39% over prior year's
first quarter of 45,189 Boe/d. Production for the first quarter of 2018
was comprised of 72% crude oil, 13% natural gas and 15% NGLs. RSP's
average realized oil price for the first quarter of 2018, before the
effects of hedges, was $61.87 per barrel, a negative $1.00 differential
compared to average NYMEX WTI pricing of $62.87 per barrel for the same
period, or 98% of NYMEX WTI pricing. RSP's average realized natural gas
price for the first quarter of 2018, before the effects of hedges, was
$1.98 per Mcf, a negative $1.02 differential compared to average NYMEX
Henry Hub pricing of $3.00 per MMBtu for the same period, or 66% of
NYMEX Henry Hub pricing. RSP's average realized NGL price for the first
quarter of 2018 was $18.33 per Bbl, or 29% of NYMEX WTI pricing for the
same time period. RSP's average realized commodity price per barrel of
oil equivalent for the first quarter of 2018, before the effects of
hedges, was $48.91. Per unit cash operating expenses excluding interest
expense but including lease operating expense, gathering and
transportation expense, production and ad valorem taxes and recurring
cash general and administrative expenses were $10.17 per Boe.

Operational Update

The Company operated seven horizontal rigs and three full-time
completion crews during the first quarter of 2018 (third crew added in
late January). RSP drilled 22 gross operated horizontal wells and
completed 31 gross operated horizontal wells (Midland: seven Lower
Spraberry, seven Wolfcamp A, five Wolfcamp B, one Middle Spraberry;
Delaware: five Wolfcamp A, four Wolfcamp XY, one Second Bone Spring and
one Third Bone Spring). The Company began the quarter with 36 gross
operated horizontal drilled but uncompleted wells ("DUCs") and exited
the quarter with a total of 27 operated horizo

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