In a Nov. 12 research note, Stifel analyst Derrick Whitfield reported that Roan Resources Inc. (ROAN:NYSE) had a strong Q3/18 in terms of operations, and expanded on the company's achievements.
In Q3/18, Roan beat consensus production estimates by 2.3% by achieving an output of 46.5 thousand barrels of oil equivalent per day (46.5 Mboe/d), Whitfield wrote.
The company drilled 27 gross wells and completed 26 gross wells. As for 23 of Roan's first fully operated wells, they outperformed the industry benchmark by about 27% in their first 90 days of production. Eight wells that are post 90 days are "demonstrating a strong uptick in oil cut (43% in Q3/18 versus 28% in Q2/18)," Whitfield pointed out. Also positive is the McNeff unit, which is performing with offset wells as it should, as shown in Woodford density test results.
Roan's Q3/18 unhedged realized oil and natural gas prices beat expectations in Q3/18. They were $68.86 per barrel, 1.2% above Stifel's estimate, and $1.58 per thousand cubic feet, 13.7% above Stifel's projection, respectively.
The negative aspects of Roan's Q3/18 report related to costs, Whitfield explained. EBITDAX (earnings before interest, taxes, depreciation, amortization and exploration expense) was 0.6% below consensus' forecast at $75.4 million. Capex exceeded Stifel's estimate by 19.1%, coming in at $244.2 million, due to an increase to drilling and completing predecessor wells, according to Roan.
Similarly, the company's full year 2018 capex guidance is more than expected, 6.1% above Stifel's forecast. Along with costs associated with predecessor wells, Roan cited adding an eighth drill rig earlier than anticipated and higher completion costs as reasons for the higher capex.
Another negative factor is that Roan reduced its exit rate guidance for the year to 60 Mboe/d from 61 Mboe/d, Whitfield noted.
However, having considered all operational and financial components, Whitfield concluded, "Net-net, we believe the strong operational update offsets the higher-than-expected capex guide."
Stifel has a Buy rating and a $27 per share 12-month target price on Roan, whose stock is currently trading at around $12.85 per share.[NLINSERT]
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Disclosures from Stifel Nicolaus & Company, Roan Resources Inc., November 12, 2018
I, Derrick Whitfield, certify that the views expressed in this research report accurately reflect my personal views about the subject securities or issuers; and I, Derrick Whitfield, certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Our European Policy for Managing Research Conflicts of Interest is available at www.stifel.com.
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