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Edited Transcript of ROAN.N earnings conference call or presentation 13-Nov-18 4:00pm GMT

Q3 2018 Roan Resources Inc Earnings Call

Nov 19, 2018 (Thomson StreetEvents) -- Edited Transcript of Roan Resources Inc earnings conference call or presentation Tuesday, November 13, 2018 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alyson Gilbert

Roan Resources, Inc. - IR Manager

* Tony Maranto

Roan Resources, Inc. - Chairman & CEO

* David Edwards

Roan Resources, Inc. - CFO

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Conference Call Participants

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* Derrick Whitfield

Stifel Nicolaus - Analyst

* Ron Mills

Johnson Rice - Analyst

* Neal Dingmann

SunTrust Robinson Humphrey - Analyst

* David Beard

Coker & Palmer - Analyst

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Presentation

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Operator [1]

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Good morning and welcome to the third-quarter 2018 Roan Resources earnings conference call. (Operator Instructions). I would now like to introduce you to Alyson Gilbert, Manager of Investor Relations. You may begin ma'am.

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Alyson Gilbert, Roan Resources, Inc. - IR Manager [2]

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Good morning and thank you for joining our third-quarter earnings investor conference call. We will start today with prepared remarks from Tony Maranto, Chairman and Chief Executive Officer, and David Edwards, Chief Financial Officer. Also on the call available for Q&A are Joel Pettit, Executive Vice President of Operations and Marketing, and Greg Condray, Executive Vice President of Geoscience and Business Development.

Today's call will contain forward-looking statements that will describe our beliefs, goals, plans, strategies, expectations, projections, forecasts and assumptions. Please note that the Company's actual results may differ from those anticipated by such forward-looking statements for a variety of reasons, many of which are beyond our control.

Additional information concerning certain risk factors relating to our business, prospects and results are available in the Company's filings with the SEC, including the Company's quarterly report on Form 10-Q and any other public filings and press releases. Roan does not undertake any obligation to update forward-looking statements made on this call.

Finally, we will refer to certain non-GAAP financial measures. For a reconciliation of these measures to generally accepted accounting principles, please refer to the third-quarter press release or slide presentation that have been posted to the Company's website at www.RoanResources.com. I will now turn the call over to Mr. Maranto. Tony?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [3]

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Thank you, Alyson, and thank you to everyone that has joined us for today's call. We appreciate your interest in Roan. We are excited to be able to talk about our third-quarter results, which is our first quarter as a standalone public company, and also share all that we have accomplished in such a short amount of time.

The third quarter demonstrates significant progress for the Company, from both an operational and corporate development perspective. In addition to the advancements Roan has made to expand our team and finalize our board composition, we were also able to complete the process to transition Roan to a standalone public company.

Since our last call with investors in late July, three critical steps have occurred to get us to this point. First, in early August, Linn Energy completed the spinoff of Riviera which resulted in the soul assets and liabilities of public company, LNGG, as the 50% equity interest in Roan Resources.

Second, in mid September the reorganization agreement was signed between Roan Holdings and Linn to consolidate their interest in Roan Resources, LLC into the newly formed company Roan Resources, Inc. Shortly thereafter Road Resources, Inc. became (sic - began) trading over-the-counter as the public company, Roan, in connection with the closing of the agreement.

Finally, as of last Friday, we up listed to and began trading on the New York Stock Exchange. We endeavored on that process to increase capacity to invest in Roan. Now with that process complete we believe the next path to obtaining a premium valuation for Roan and driving returns for our shareholders is by providing an undeniable demonstration of our asset quality. As we continue to create value through the development of our assets and management of our production base, we will capitalize on the strategic opportunity set available to us.

As a quick company overview for those that are newer to following Roan, we are the only company of our size that is a pure play Oklahoma operator with a focus on the Merge. Roan started taking over drilling operations in January of this year from our two predecessors and, by the end of the second quarter, we had fully taken overall operations of the company.

I'm very pleased with the people we have added throughout the year and, at our current level of 170 employees, we are very close to being fully staffed for our current production level. We now have approximately 170,000 net acres across the Eastern Anadarko basin with over 118 of those net acres located in the Merge.

Over 80% of our Merge acreage is focused in the oil and liquids rich windows where we have been the most active since taking over operations. Within our Merge footprint we have a multi-decade inventory highly economic locations and are over 80% HPP'd. There is ample midstream infrastructure in place and we have a very solid relationship with both of our primary natural gas midstream providers.

We are also advantageously located to Cushing and our all-in differential and transportation cost is less than $1.50 per barrel of oil. We are running eight rigs which puts us as one of the top operators in Oklahoma and we plan to maintain this level of activity into 2019.

Through the third quarter we have over 130 operated producing wells in the Merge, making us the most active producer in the play. Production is currently trending at approximately 50,000 Boe per day and we have 12 to 16 gross operated wells that are scheduled to come online in the next few weeks that would get us to our projected 2,000 exit rate of 58,000 to 62,000 Boe per day.

We are on track to grow production 110% from fourth quarter 2018 over fourth quarter 2017. And more importantly, we have line of sight to free cash flow by first half 2020, which is pretty remarkable for a company that was formed just over a year ago.

Roan has a lot of organic growth potential from our current exit position and we will capitalize on that over the years to come. Our goal is to continue to maintain a conservative leverage ratio which provides financial flexibility to grow in a disciplined manner.

Now switching gears to our third-quarter operations. To begin, we grew total production 30% to 46,500 Boe per day quarter-over-quarter and liquids production grew 35% quarter-over-quarter. We said the production growth would come and now you are seeing it firsthand.

If you look back a year, we have current total production over 100% year-over-year and oil production over 140% year-over-year. This speaks directly to the quality of our position in the Merge where we have focused our efforts. September production was 48,200 Boe per day with total liquids production of 55%.

During the quarter, we drilled 27 gross operated wells or 44.6 miles and year-to-date we have drilled 66 gross operated wells or 95 miles. We have made substantial progress with our drilling times throughout the year. Our 2-mile Mayes wells are being drilled in 13.8 days, an improvement from our predecessors by over 50%. Our 2-mile Woodford wells are being drilled in 19 days, an improvement of 35%.

We have set a number of company records ahead of these times indicating that drill times should continue to trend lower as we move current records to average results. During the quarter we brought online 26 gross wells, by far our most active quarter. Year-to-date we have brought online a total of 58 gross wells.

The most important thing to note about our activity this quarter is how the results compare to previous quarters. Of the 58 gross completed wells, there were 23 wells that were selected, built and completed by Roan that have at least 90 days of production. The average 90-day production rate for these wells is 1,560 Boe per day, 35% oil, 67% total liquids, normalized with a 10,000 foot lateral. And these wells had an average length of 7,685 feet.

These 23 wells are outperforming our 230 industry wells in the Merge on average by 27% based on cumulative production at 90 days. This equates to approximately $1 million in additional gross revenue per well at 90 days based on $60 WTI oil. We feel very strongly that this outperformance is directly correlated to the focus we have put on targeting where our operated drilled wells have been in target 95% of the time compared to 58% by our predecessors.

These results are very promising, but we still think there's more upside to come as these results are spread across several GOR regions. We believe the distribution of results will continue to narrow and outperform industry activity as additional fully operated wells reach 90-plus days of production.

Even though the Roan fully operated wells are outperforming previous wells, we still need more time before we are comfortable updating our previously provided type curves. We would like to see a few more quarters of production as well as results from our recent density test. We are optimistic on what we have seen so far, so please stay tuned.

Of the eight third-quarter wells that have at least 90 days of production, the average oil percentage at 90 days is 43% compared to 28% for the second-quarter wells and 30% for first-quarter wells. Oil production should continue to trend up as more of Roan's fully operated wells come online that highlight our focus on targeting and other operational improvements.

Through the third quarter there have been 40 wells that have at least 90 days of production. The average 90-day peak for these 40 wells is 1,428 barrels of oil equivalent per day with 32% oil and 65% total liquids when normalized with 10,000 foot laterals with an average lateral length of approximately 7,500 feet.

As I noted earlier, the third-quarter wells within 90 days of production are oilier than this average as they were fully operated by our teams. We believe 90-day rates are a good indicator of how a well is going to perform.

Our school of thought for oil reservoirs is that it is essential to keep bottom hole flowing pressure above the bubble point for as long as possible. This keeps gas and solution longer which ultimately helps you produce more oil over the life of the well and create more value.

Results from this type of pressure management are hard to see at 30-day rates and the IPs aren't as impressive and the cumulative rates will be lower. But you start to see the impact on results at 90-day and longer rates when it is noticeable that the wells are not declining as fast and cumulative oil production is higher. This is the approach we are taking on all of our completions.

With that, I will now turn the call over to our CFO, David Edwards. David?

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David Edwards, Roan Resources, Inc. - CFO [4]

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Thank you, Tony, and thank you for everyone who has joined us today. Let me start with a recap of our financials for the third quarter and then move to our updated guidance and wrap up with our credit and corporate return metrics.

Regarding the results of the quarter, we had a net loss of $301 million, which was impacted by a $300 million income tax expense related to the initial deferred tax liability resulting from the reorganization and a $23 million noncash mark-to-market loss on derivative contracts. Adjusting for these and various other items resulted in adjusted net income for the quarter of $32 million or $0.21 per share. On a year-to-date basis, adjusted net income amounted to $109 million or $0.72 per share.

We believe it is unique for a company of our age to be generating income of this quantum to the equity level, and we will discuss this further in the prepared remarks when we address corporate level returns.

Adjusted EBITDAX for the quarter was $75.4 million, which is a 23% increase since the second quarter of 2018, and an increase of approximately 100% over the pro forma EBITDAX from the same period in 2017. EBITDAX margins for the quarter were $17.64 per Boe and cash expense of $7.28 per Boe.

LOE per Boe was $3.44, which was an increase from previous quarters, primarily due to maintenance and surface repairs incurred from previously shutting wells related to start up of the Chisholm Trail facility. As we will discuss in the guidance section, we expect future LOE to trend below these levels.

Production tax also increased from the previous quarter to $1.45 per Boe, which is related to the new legislation on gross production tax in Oklahoma which took effect in July of this year. Finally, cash G&A per Boe was $2.39.

Capital expenditures for the quarter amounted to $244 million, which consisted of $226 million of drilling and completion and $18 million of other capitalized costs. There were two primary contributing factors to the increase in D&C CapEx. First, CapEx amounts in the quarter included actualized costs from wells drilled by our predecessors. And second, we increased our rig count to eight rigs sooner than originally anticipated and also continue to reduce our drilling cycle times, which combined to contribute to the spudding of an additional 3-mile equivalent net wells in the quarter.

Within this quarter's release we have provided component guidance for the fourth quarter of 2018 period. We anticipate production to be 52,000 to 56,000 Boe per day for the quarter with an exit rate of 58,000 to 62,000 Boe per day within our original guidance target and indicating quarter-over-quarter growth of 12% to 20%.

We anticipate the liquids mix to be approximately 57%, which is lower than previously anticipated, and is a result of the recent election to reject ethane through the balance of the year as a result of the recent price dynamics between natural gas and NGLs.

We are guiding to LOE of $2.60 to $2.90 per Boe, which is notably below the third-quarter of 2018 run rate and in line with our year-to-date operating costs. We expect this range to be a normal run rate as we transition past extensive surface and maintenance costs related to midstream facility startups.

Production taxes is estimated to be between 5.2% and 5.3% and cash G&A is expected to be between $2.10 and $2.40 per Boe. Our capital expenditures in the fourth quarter are expected to be between $200 million and $225 million which includes $175 million to $195 million of D&C and $25 million to $30 million of other CapEx. This capital activity is anticipated to result in the timeline well count of 26.8 net mile equivalent wells in the quarter.

Speaking to our credit metrics, we exited the quarter with net debt of $391 million which was fully sourced from our credit facility. During the quarter we completed our fall 2018 redetermination with our lender group who are supportive of an increase in the borrowing base to $675 million and a 25 basis point reduction to our pricing grid. This increase equates to a $[250] million increase since the last redetermination and represents a $475 million increase in the facility since this time last year.

We view the substantial increase in secured value and support from our lender group as confirmation of the strong asset performance we are seeing out of the development program. Based on our new borrowing base of $675 million we had approximately $285 million of liquidity at the end of the quarter.

We continue to place significant emphasis on our credit metrics as we believe our balance sheet presents a competitive advantage as we seek to mitigate risks inherent in this business and consider strategic pursuits. Our third-quarter credit metrics of 1.3 last quarter annualized leverage and net debt to total capital of 16% rank us around the top quartile of our peer group.

Finally, we want to close out the financial section of our prepared remarks by speaking to our corporate returns. Based on our adjusted earnings through the 2018 period, we have achieved an annualized ROCE of 9.8% and ROE of 10.8%. We believe it is an accomplishment for a company of our age to be able to present corporate returns at this level to our shareholders and view it as a testament to the asset quality we have. With that I will turn the call back to Tony.

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [5]

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Thanks, David. I would like to highlight how unique of an investment opportunity Roan is. In our first quarter as a standalone company we have grown production 30% quarter-over-quarter, grown liquids production 34% quarter-over-quarter and have generated over $75 million in adjusted EBITDAX.

We continue to maintain a leverage ratio of less than 1.5 times while producing a recycle ratio of 4.4 times. We also will remain committed to running this Company in the most capital efficient manner possible and will strive to be as transparent as possible.

We understand the market is still familiarizing itself with the Merge and we hope, as we continue to release strong results, you will see its high-quality. We are very proud of what we have built in such a short period and trust me when I say we are just getting started. With that, operator, we are now ready for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions). Derrick Whitfield, Stifel.

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Derrick Whitfield, Stifel Nicolaus - Analyst [2]

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Good morning all and congrats on the progress you've made since the last call. So, on my first question, understanding that you are planning to provide firm 2019 guidance with or before Q4 earnings, would it be reasonable to assume the previous 2019 commentary on production and CapEx remains broadly intact based on your progress to date in the current commodity environment?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [3]

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Yes. Where we stand today, we are still firm on all of our 2019 guidance that we gave back in July. Again, we will update either before or at our first-quarter or year-end earnings report, but that's where we stand currently.

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Derrick Whitfield, Stifel Nicolaus - Analyst [4]

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Great. And then as my follow-up, perhaps for yourself, Tony; the most impressive slide I've seen in a corporate presentation this quarter is your slide 10 as you guys are effectively shifting the distribution of the curve and narrowing expected results along that higher average.

If you were to think about your inventory set and technical workflow processes, would you expect the bottom half of your curve to continue to shift to the right over the next couple of years?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [5]

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We expect a couple things, and thanks for the question. Yes, to take your last statement first -- as an effective targeting, the first thing you would expect to see is the lower end of your distribution will shift. That's what's going to cause an overall movement upward in your median just by changing that dynamic.

And then as we grow in this asset and improve our quality of well selection, you'll see more wells in the upper end -- upper quartile as well, which, again, will help to both narrow the distribution by lowering -- by raising your lower end and then moving your median up by putting more wells in the upper quartile.

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Derrick Whitfield, Stifel Nicolaus - Analyst [6]

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Great, that's very helpful. Thanks for taking my questions.

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Operator [7]

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Ron Mills, Johnson Rice.

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Ron Mills, Johnson Rice - Analyst [8]

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An extension maybe Derrick's question as we think of 2019. Given the fourth-quarter production guidance you provided, but the exit rate still hitting what your original target was. Does that at least bode well or point to a more positive outlook for 2019 given the kind of performance you've seen on your wells relative to type curves to date?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [9]

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Absolutely and thanks for the question, Ron. What this shows is, first of all, that we have our fourth-quarter loaded with pads that will be coming on over the next say six weeks that are going to be more highly oil -- higher oil cuts, more oil loaded, which we think will really tee up 2019 very well. And then of course we'll be able to give more color to that early part of 2019.

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Ron Mills, Johnson Rice - Analyst [10]

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And a continuation of your answer, we noticed -- or you pointed out that the most recent completions are a lot more oily than what even your average was for the third quarter and second quarter. It sounds like you are going to bring on some more oily pads here in -- or wells here in the fourth quarter.

Given your level of HBP status in the Merge, how should we think about that product mix since you will be more able to direct your activity on highest returns as opposed to HBP activity?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [11]

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The short answer to your question, Ron, is you will see higher oil cuts, not just liquids cuts but actual oil cuts. We are transitioning this program -- we made these statements back in our July release that we started from a platform of wells that were -- had been teed up by our predecessors that were more spread out across the region.

But as we were to take it over and start to shape the drilling program where we wanted, it would be to move more wells into the oilier parts of the play. And that's what we are doing both here in the fourth quarter of 2018 and we'll continue that into 2019.

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Ron Mills, Johnson Rice - Analyst [12]

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Great. And then one last one, when you think about your spacing tests, I know that it's still really early for you, but you continue to highlight your inventory potential, talking about six wells per formation per section. When would you expect to have some data available from some of these spacing tests in both the Mayes and the Woodford? And when would you potentially test even tighter?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [13]

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Ron, just from a higher perspective, we hope to have results that we give out at year-end call about the current six well test that we have going now. We are encouraged -- we have it the presentation. We are encouraged with the early results but we still need to see more time.

And so as time goes on quarter-to-quarter we would expect to have more spacing test results as quarters go on. I think we are in a good place right now in this six to eight well per section per bench per unit spacing that -- we think that's where our inventory will land, but we will give more color on that as we move from quarter to quarter.

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Ron Mills, Johnson Rice - Analyst [14]

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Great. I'll let someone else jump in. Thank you.

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Operator [15]

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Neal Dingmann, SunTrust.

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Neal Dingmann, SunTrust Robinson Humphrey - Analyst [16]

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Good morning, all. Tony, my question is a little bit about what's been asked earlier about the spin. It seems like with the trajectory you have, especially with the eighth rig, you certainly are on pace for the free cash flow by first quarter 2020. I guess my question is the market seems right now, judging by your stock price today and recent to be hitting guys that are outspending in the near-term.

So I guess my question is when you and David sort of make the plans, is it to stay the course regardless of what prices do between now and the end of next year? Or are there things that could influence the plan before that? Because again, there's no question you are on a trajectory for big free cash flow here sooner rather than later. I am just wondering if there are things that could potentially change that plan in the near-term.

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [17]

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I think absolutely there could be changes in the market that would make us rethink 2019 and 2020. Right now we are on the same trajectory. We like the wells we're bringing on and we like the way we are moving into 2019, which is the reason why we are sticking with the guidance that we put out earlier. But of course we are adaptable to any changes in market.

We think that's one of the real keys to this asset is our ability to be flexible with how we construct this relationship between how we grow and how much free cash we would be generating. So we would stay adaptable to the market as time goes on.

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Neal Dingmann, SunTrust Robinson Humphrey - Analyst [18]

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Okay and just lastly, you mentioned you're getting some positive results in two ways. One, the costs certainly seem to be continuing to come down noticeably for you all. And then secondly, as you are doing some of these wells you might have mentioned the upside in the oil.

Could you talk about if that trend continues, or potentially even where we are now, what that means for returns versus, again, what you or Dave and the guys were originally thinking?

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David Edwards, Roan Resources, Inc. - CFO [19]

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This is Dave. I can speak to that quickly. I think that is going to be an evolving equation for us where there's still knobs that we can turn to push the development program. Like you alluded to, there is a capacity to continue to shift the program eastward onto the oil plank and drive that oil mix. And we will continue to test completion designs and production optimization.

And all these things are to say that the trajectory should be beneficial. We don't know where it is ultimately going to end up. But to Derrick's earlier point about our cumulative distribution plot on IP90s, our intent is that continues to shift to the right and I think we have enough knobs to tweak and pull to get there.

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Neal Dingmann, SunTrust Robinson Humphrey - Analyst [20]

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All right, guys. Keep up the great work.

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Operator [21]

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(Operator Instructions). David Beard, Coker & Palmer.

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David Beard, Coker & Palmer - Analyst [22]

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Thanks for the clarity on the slides and the press release, we appreciate it. Just a little bit of a detail on the crude oil production or the mix. Obviously it's been flattish from the 1Q despite the ramp in overall production. Is that really just due to the mix of wells brought online?

Because it would seem like there were some very gassy wells brought on in the third quarter. Is there something else that is going on or maybe the older wells are becoming gassier? Maybe just a little color on the three-quarter trajectory relative to crude oil production would be helpful.

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [23]

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David, I think it's a couple things; one is kind of what you described. We had quite a few wells shut in or not completed through the end of the first quarter and into the second quarter waiting on our -- Blue Mountain's new cryo plant to come up. And a lot of those wells, which, again, were more predecessor chosen locations, just happen to be more gassy. So that was the big influx of production that hit us very early first quarter, which kind of skewed third-quarter numbers to a degree.

And on top of that, if I go all the way back and look at our December/January production of 2017 into 2018, we brought on some pretty large oil wells, which also skewed the oil number up just a little bit first quarter going into second quarter. So those couple of reasons is what's kept oil cuts flat through the year. As we now look into fourth quarter I think what you will see from our next set of results is that shift -- that shift from these gassier locations into the lower GOR regions.

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David Beard, Coker & Palmer - Analyst [24]

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All right, that's helpful. And then longer term when you look out over your asset base, what percent of your inventory would you consider oilier over 40% crude?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [25]

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Well, what we've guided to, David, is about 80% of our acreage is what we consider to be in the -- call it for descriptive reasons, just the oilier more liquids rich regions.

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David Beard, Coker & Palmer - Analyst [26]

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All right, that's helpful. And then just last, what WTI price assumption are you using on your first-half 2020 goal of cash flow neutral?

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David Edwards, Roan Resources, Inc. - CFO [27]

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Sure, David. We budget off of a $65 oil price and a $2.75 natural gas price.

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David Beard, Coker & Palmer - Analyst [28]

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Great. I appreciate the time. I will let someone else jump in.

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Operator [29]

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Ron Mills, Johnson Rice.

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Ron Mills, Johnson Rice - Analyst [30]

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Tony, I had a couple quick follow-up. Just as it relates to the capital spending, you talked about adding the eighth rig and drilling efficiencies. But of the incremental CapEx, is it roughly evenly split between the prior -- or predecessor accruals, the increased efficiencies and earlier add, and then also the completion designs you are testing? Is that a good way to think about that?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [31]

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Let me turn this to David for some clarity. Then I'll probably come back on the line with a little bit more directional comments.

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David Edwards, Roan Resources, Inc. - CFO [32]

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When we talk about the shift in capital guidance, there was about a 10% increase from previous guidance in the midpoint of the range, about $70 million. And as we mentioned in the prepared remarks, there was an accrual in the third quarter of $25 million that related to wells drilled by our predecessors that we would not consider reflective of our activity run rate for the third quarter.

If we adjust for that amount, the increase in the midpoint of the guidance was approximately $45 million or 4% for the annual period. And I think you are right how you allocated that between the various buckets. A part of it was because there was an addition to an eighth rig sooner than anticipated.

Part of it is because we continue to test completion designs and increase the stimulation intensity with which we are attacking the reservoir. That's something we will test and evaluate for long-term considerations at some future point.

And then third, there is an increase in non-operated D&C CapEx and this is primarily related to peers shifting to pad development on our non-operated acreage. As a result we increased our estimate for non-op D&C in the fourth quarter.

One of the impacts that we're seeing is there has been a higher shift of our peers towards development and this impacts us in two ways. One is it increased the capital intensity with which we incur non-op D&C. And the other is effectively extends the lag between when we incur the CapEx and when production comes to first sales. So, that's why we're seeing a bit higher trend in CapEx, although a deferred impact on how that is flowing through production.

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [33]

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And just directionally, I kind of look at it two different ways. One is of course in the third quarter we are still -- we're still a start-up company, so we are still trying to finalize everything that we need to on a cost basis going forward.

And second -- and I've said this numerous times when we've been on the road. On a CapEx per well standpoint what we are still focused on is as we take drilling costs down and save dollars on the drilling side, we are looking to put more money into the completion side of things. There are still more things we want to try to test to increase value per well. And there's a whole laundry list of things we are looking at, everything from prop per foot two-stage lengths to cluster spacings.

All these variables that would add to value of course also add to CapEx. So until we get to the point where we are comfortable with that we have taken our median well and really moved it up that distribution chart as far as we can push it, at that point we will move more into a step two operation where we start to be more capital efficient but starting from the best well possible.

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Ron Mills, Johnson Rice - Analyst [34]

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Am I correct in reading into the presentation and press release that really most of the productivity enhancement to date has been related to lateral targeting? Is there any data associated with the increased or improved completion designs also factored into that or is that still really more on the come?

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [35]

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It is more on the come, Ron. Again, you need production time to really see the impact. And that's -- if you will allow me to answer that question by saying stay tuned, I think that's the best answer right now.

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Ron Mills, Johnson Rice - Analyst [36]

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Great, thank you very much.

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Operator [37]

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There are no further questions at this time. I turn the call back over to Mr. Tony Maranto.

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Tony Maranto, Roan Resources, Inc. - Chairman & CEO [38]

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Thank you and thank you, guys, for taking the time to join the call this morning. Suffice to say, we are excited about -- for what we have started here at Roan and what it looks like for us going forward. And we're really looking forward to the next call. Thank you, guys, very much and I hope you all have a wonderful day.

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Operator [39]

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This concludes today's conference call. You may now disconnect.