RSP Permian - Q3 Results

[dan_s]

RSPP reported adjusted 3Q 2017 EPS of $0.18, which is exactly what I forecast.
Operating cash flow per share of $0.82 compares to my forecast of $0.80
Production of 58,932 BOE per day compares to my forecast of 60,000 BOEpd. Much higher NGL prices is what got revenues above my forecast.

The Company operated four horizontal rigs in the Midland Basin and three horizontal rigs in the Delaware Basin throughout the third quarter 2017. RSP utilized two full-time completion crews during the third quarter. RSP drilled 26 operated horizontal wells and completed 22 operated horizontal wells (Midland: seven Lower Spraberry, seven Wolfcamp A, three Wolfcamp B, one Middle Spraberry; Delaware: two Wolfcamp A, one Wolfcamp B, one Third Bone Spring). The Company began the quarter with 22 operated horizontal drilled but uncompleted wells ("DUCs") and exited the quarter with a total of 26 operated horizontal DUCs.

They plan to complete a lot of DUC wells in Q4, which should push production over 65,000 Boepd at year-end.

[dan_s]

I have updated my forecast/valuation model for RSPP and it will be posted to the EPG website this afternoon.

My valuations is adjusted to $45.00, which compares to First Call's price target of $45.23.

I am probably being too conservative on my production forecast for 2018 because it sounds like they are going to ramp up production into year-end. I also like the fact that a lot of their production is hedged for 2018 with collars that have ceilings above the current oil price. None of their NGLs are hedged, which I consider a plus.

RSPP should be able to fund their 2018 drilling program almost entirely from operating cash flows and increase production by 30% to 40%.