Rose Hill Acquisition Corporation

Third quarter revenues were $76.3 million. Production averaged 20,576 BOE/d, with mix of 74% crude oil, 14% NGLs and 12% natural gas. Net income was $20.9 million, or $0.88 per diluted share, including a $41.9 million noncash pretax gain on commodity derivative instruments. Adjusted EBITDAX was $49.1 million, down 13% versus Q3 2018, driven mainly by lower commodity prices and higher lease operating expenses. Average realized oil price was $52.9 per barrel and total equivalent realized price was $40.28 per BOE, both unhedged; realized natural gas price was $0.27 per Mcf and realized NGL price was $8.10 per barrel, down 71% year over year. Total cash operating expenses were $23.8 million, or $12.56 per BOE. Liquidity at September 30 was $74 million, and the borrowing base under the revolver increased from $300 million to $340 million. For the rest of 2019, Rosehill added up to 6 drilling targets and modestly lowered full-year adjusted EBITDAX, with the next formal 2020 update expected in mid-December.

Dave French said the quarter showed strong execution, highlighted by resumed drilling, production growth, and a strong September finish above 23,000 BOE/d. He emphasized keeping one rig running through year-end to add DUCs, maintain crew continuity, and take advantage of lower well costs, which he said were down high single digits from the first half of 2019. Looking ahead, he said early 2020 planning points to a more measured, continuous spending profile aimed at cash flow neutrality or better.

Craig Owen said Rosehill generated $76.3 million of revenue, $20.9 million of net income, and $49.1 million of adjusted EBITDAX in Q3, with the EBITDAX decline tied primarily to weaker commodity pricing and higher lease operating expense. He detailed cash operating expenses of $23.8 million, or $12.56 per BOE, including $6.45 per BOE of direct LOE and $3.78 per BOE of cash G&A, and noted that gas and NGL pricing remained weak, with realized gas at $0.27 per Mcf and NGLs at $8.10 per barrel. On capital and balance sheet, he highlighted a borrowing base increase to $340 million, total liquidity of $74 million, and a strong hedge book with most Q4 2019 oil hedged in the high-$50s and about 80% of 2020 and 2021 production hedged around $60 per barrel.

Analysts focused on 2020 activity levels, DUC build, and whether Rosehill would need to return to a two-rig program; management said it expects to drill continuously on one rig, with the option to supplement with a second rig if needed, but emphasized maintaining efficiency and staying within cash flow. Questions also centered on Southern Delaware learnings and whether higher natural fracturing was a surprise; Brian Ayers said the south is indeed more naturally fractured than the north and that Rosehill is adapting landing and completion designs, including a customized frac plan for the next well. The final questions addressed infrastructure and midstream monetization, with management saying southern facilities are complete, SWD capacity is ample, and the water midstream assets will be retained for now to capture cost savings, though the company remains open to the right transaction.