Second Quarter 2017 and Recent Highlights
Production increased 106% to 54.3 MBoe/d (72% oil, 88% liquids), compared to 2Q16 and increased 20% compared to 1Q17 < My forecast was 53.0 MBoe/d
Net income of $31.1 million, or $0.20 per diluted share. Adjusted net income, which does not include certain items, was $26.0 million, or $0.17 per diluted share < My forecast was $0.18 EPS
Adjusted EBITDAX increased to $135.5 million, a 132% increase compared to 2Q16 and a 9% increase compared to 1Q17
Cash operating expenses were $9.49 per Boe, 10% lower than 1Q17, including lease operating expense of $4.72 per Boe (before gathering and transportation), a 13% decrease from 1Q17
Recently closed bolt-on acquisitions of leasehold acreage and mineral interests in the heart of the Company's Delaware Basin position for an aggregate purchase price of $227.9 million acquiring approximately 6,000 net acres, 4,500 net royalty acres(1) and 500 Boe/d of production
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Increased oil hedges, and now have total oil derivative contracts covering 5.2 million barrels of 2H17 oil volumes and 6.7 million barrels of 2018 oil volumes
Maintained strong liquidity position, with $33.8 million of cash and $58.0 million in borrowings outstanding under the Company's revolving credit facility ($1.1 billion borrowing base, $900 million Company-elected commitment)
RSP Permian Q2 Results
RSP Permian Q2 Results
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: RSP Permian Q2 Results
I have updated my forecast model for RSPP and it will be posted to the EPG website this evening.
My valuation adjusts to $47.00/share, compared to First Call's price target of $46.28. John White at Roth Capital gives it a net asset value of $44.00/share.
The company is on-track to exit this year with production over 70,000 BOE per day. Year-over-year production growth should exceed 90%.
The company has not given guidance for 2018. I am using 80,000 BOE per day for 2018 in my forecast, which is probably way too low. At the rate they are going, production will top 80,000 Boepd in Q1 2018.
The only minor negative that I see for RSPP is that the production beat for Q2 was almost all from natural gas and NGL growth. This may "feed the fear" on Wall Street that the Permian is turning "gassy". I have adjusted the production mix in my forecast model. Oil production was very close to my forecast.
All of the companies that have reported Q2 results have reported lower NGL prices than I was using in the forecasts. Other than that, my forecast assumptions have been very close. I have been modeling upstream companies for almost 20 years, so maybe I am getting good at it.
My valuation adjusts to $47.00/share, compared to First Call's price target of $46.28. John White at Roth Capital gives it a net asset value of $44.00/share.
The company is on-track to exit this year with production over 70,000 BOE per day. Year-over-year production growth should exceed 90%.
The company has not given guidance for 2018. I am using 80,000 BOE per day for 2018 in my forecast, which is probably way too low. At the rate they are going, production will top 80,000 Boepd in Q1 2018.
The only minor negative that I see for RSPP is that the production beat for Q2 was almost all from natural gas and NGL growth. This may "feed the fear" on Wall Street that the Permian is turning "gassy". I have adjusted the production mix in my forecast model. Oil production was very close to my forecast.
All of the companies that have reported Q2 results have reported lower NGL prices than I was using in the forecasts. Other than that, my forecast assumptions have been very close. I have been modeling upstream companies for almost 20 years, so maybe I am getting good at it.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: RSP Permian Q2 Results
Here are John White's comments after listening to the RSPP conference call:
John's price target is $44.00.
RSPP reported in line results on production and EPS/CFPS/EBITDA, further addressed below. We thought the high points of the call were the strong well results, in particular several strong wells from the Second Bone Spring and Avalon formations and the encouraging remarks on managing capex.
The tone of the call was set early by CFO Scott McNeil, who delivered a statement that management was determined to employ a business plan that emphasized production growth per debt adjusted share of common stock rather than seeking to maximize production growth for its own sake. This tone was furthered during the call with comments that the decision had been made to reduce leverage ratios by keeping capex in line with previous guidance (and no change to production guidance). Still on this thought, RSPP advised it was deferring completions of some wells from 2017 to early 2018, in order to benefit from reduced well costs RSPP sees on the horizon.
Second Bone Spring, Avalon Completions: In our opinion, the successful results from these zones are significant. They are significant because they provide strong support for additional reserve and production growth and add an element of reservoir diversification to the Delaware Basin asset base and less reliance on the Lower Wolfcamp A formation.
On its Delaware Basin acreage, RSPP reported two new Second Bone Spring wells and one Avalon well. The Ludeman 1408H well was completed in the Second Bone Spring formation for an IP30 of 915 BOE per day and 143 BOE IP30/1,000 feet. It was noted these rates were normalized from an IP24 test, as the well is still cleaning up and awaiting an ESP. Another Second Bone Spring well, the Ludeman F 505H was completed for an IP30 of 952 BOE per day. The Brunson 1111H was completed in the Avalon formation with an IP30 of 1,053 BOE per day. These results are on par with the results from the Lower Wolfcamp A wells. That said, we point out the Rudd Draw 26-21 07H, in the Lower Wolfcamp A, was impressive with an IP 30 of 2,020 BOE per day.
Actual production was 54,341 BOE per day against the consensus estimate of 53,871 BOE per day. Actual adjusted EPS/CFPS/EBITDA was $0.17/$0.71/135.5 million versus the consensus estimate of $0.15/$0.73/$135.3 million.
John's price target is $44.00.
RSPP reported in line results on production and EPS/CFPS/EBITDA, further addressed below. We thought the high points of the call were the strong well results, in particular several strong wells from the Second Bone Spring and Avalon formations and the encouraging remarks on managing capex.
The tone of the call was set early by CFO Scott McNeil, who delivered a statement that management was determined to employ a business plan that emphasized production growth per debt adjusted share of common stock rather than seeking to maximize production growth for its own sake. This tone was furthered during the call with comments that the decision had been made to reduce leverage ratios by keeping capex in line with previous guidance (and no change to production guidance). Still on this thought, RSPP advised it was deferring completions of some wells from 2017 to early 2018, in order to benefit from reduced well costs RSPP sees on the horizon.
Second Bone Spring, Avalon Completions: In our opinion, the successful results from these zones are significant. They are significant because they provide strong support for additional reserve and production growth and add an element of reservoir diversification to the Delaware Basin asset base and less reliance on the Lower Wolfcamp A formation.
On its Delaware Basin acreage, RSPP reported two new Second Bone Spring wells and one Avalon well. The Ludeman 1408H well was completed in the Second Bone Spring formation for an IP30 of 915 BOE per day and 143 BOE IP30/1,000 feet. It was noted these rates were normalized from an IP24 test, as the well is still cleaning up and awaiting an ESP. Another Second Bone Spring well, the Ludeman F 505H was completed for an IP30 of 952 BOE per day. The Brunson 1111H was completed in the Avalon formation with an IP30 of 1,053 BOE per day. These results are on par with the results from the Lower Wolfcamp A wells. That said, we point out the Rudd Draw 26-21 07H, in the Lower Wolfcamp A, was impressive with an IP 30 of 2,020 BOE per day.
Actual production was 54,341 BOE per day against the consensus estimate of 53,871 BOE per day. Actual adjusted EPS/CFPS/EBITDA was $0.17/$0.71/135.5 million versus the consensus estimate of $0.15/$0.73/$135.3 million.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group