Rosehill Resources Valued at $350 Million

Rosehill Resources Valued at $350 Million

On July 26, 2020, Rosehill Resources Inc. (“Rosehill”) filed for Chapter 11 bankruptcy as the company pursued a restructuring plan with its creditors. Rosehill quickly announced on September 8, 2020, that the company emerged from Chapter 11 bankruptcy with a plan to give its creditors control of the company. According to the announcement, “all of Rosehill’s prepetition equity interests have been cancelled as of the Effective Date, and Rosehill Operating’s equity is majority owned by funds managed by EIG Global Energy Partners.”

Operating in the Permian Basin appears to have its benefits as the emergence from Chapter 11 bankruptcy occurred rapidly for Rosehill. However, as we will see in this blog review of Rosehill’s assets, it will be very difficult for Rosehill’s creditors to realize a return on investment unless the company commits a large amount of capital to drill highly profitable wells and commodity prices increase substantially.

According to Haynes and Boone Oil Patch Bankruptcy Monitor, Rosehill had $362.7 million of total debt, primarily held by secured creditors. The estimated market value of Rosehill’s assets based on LandGate’s analysis of public data is $350 million. In consideration of the debt, Rosehill’s total net asset value would be -12.5$ million. Instead of taking the loss by divesting the assets, EIG is certainly hoping for commodity prices to recover and for the company to execute an effective drilling program in the Delaware Basin.

A full reserve report and economic results for Rosehill’s assets will be provided in this blog. The portfolio file, which is also provided, allows anyone to review or adjust the economic parameters that went into this valuation within LandGate’s platform.

LandGate uses its advanced technology to analyze the current asset value of Rosehill Resources. These same tools are available to LandGate’s clients who are subscribed to PowerVal. PowerVal offers users accurate allocated production data, geological interpretation, forecasting, and automated engineering. All of these processes are simplified down to an efficient workflow.

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Asset Overview

Rosehill operates in the Delaware Basin in Loving and Pecos Counties, Texas. The company has 101 producing wells with gross reported production of 12,448 bbl/d oil and 40.7 MMcf/d gas as of June 2020. Based on LandGate’s forecasted economics as of October 2020, the assets are currently generating an estimated $3.1 million per month in net cash flow.

Rosehill’s non-producing assets include 5 drilled uncompleted wells, 12 service (SWD) wells, and 19 Permits. Forecasted proved net reserves totaled 175.9 MMbbl Oil, 752.3 BCF, and 77.8 MMbbls NGLs. Rosehill reports to have over 13,000 total net acres in the Northern and Southern Delaware Basin.

Rosehill Asset Area
Figure 1. Rosehill Asset Area
Figure 2. Gross Production Summary
Figure 2. Gross Production Summary

LandGate provides a geological snapshot of the formations being produced and permitted by Rosehill and groups the locations by well type. See Figure 3.

LandGate’s Delaware Basin Strat Column with Rosehill’s Assigned Locations
Figure 3. LandGate’s Delaware Basin Strat Column with Rosehill’s Assigned Locations

LandGate included PDP, PDNP, PUD and Probable reserves in the reserve report. Based on Rosehill’s asset description, LandGate modeled additional drilling locations that have not been permitted (upsides). LandGate assigned an additional 200 Wolfcamp PUD locations and 100 Bone Springs PUD Locations.

The Wolfcamp type curve used in the analysis is provided in image 4 below.

LandGate’s Wolfcamp Type Curve
Figure 4. LandGate’s Wolfcamp Type Curve

Type Curve Parameters
IP: 1,075 BOPD & 850 Mcf/d
EUR: 954.9 Mbbl oil, 1.5 BCF gas, 154 Mbbls NGLs

LandGate used a 2-mile horizontal type curve for Rosehill’s undeveloped Wolfcamp and Bone Springs locations.

Economic Results

Figure 6 below shows the estimated oil and gas reserves for PDP, PDNP, PUD, and PROB, as well as future net revenue to Rosehill as of 10/01/2020 using the 9/21/2020 NYMEX futures.

Reserve Report Summary
Figure 5. Reserve Report Summary
Net Cash Flow Summary and Net Production
Figure 6. Net Cash Flow Summary and Net Production

LandGate used an ownership assumption of 86% WI and 64.5% NRI based on Rosehill’s public website.


Price Deck (NYMEX WTI CL 09-21-20; Henry Hub NG 09-21-20)
Figure 7. Price Deck (NYMEX WTI CL 09-21-20; Henry Hub NG 09-21-20)

Rosehill’s acreage has been proven with substantial infill drilling locations. Now that EIG has control of the company, it will be interesting to see if they are willing to risk the capital to unlock Rosehill’s reserves. Based on LandGate’s data, Rosehill would need to spend 1.2 trillion dollars to fully develop the company’s acreage. Doing so would unlock just 2.8 trillion dollars of undiscounted net cash flow. Such an investment of capital appears risky at best unless the commodity price forecast improves substantially.

The future of Rosehill’s assets will be highly dependent on a well-executed drilling plan and a hope that oil prices rebound sharply.

Download the full reserve report for Rosehill Resources.

Download the portfolio file to import this valuation into LandGate’s platform to complete your own analysis for FREE, no subscription required.

With its roots as a technology and engineering company formerly named PetroValues, LandGate provides valuation reports as well as software tools for buyers of oil and gas and other property rights.

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