Main Takeaways from Q4 2018 and Updated Valuation Thoughts

Summary

  1. There were no major surprises related to Q4 2018 performance for the midstream business or for the upstream business.
  2. Management provided upstream guidance that implies production will be roughly flat for 2019 (pro-forma for Arkoma divestutire).
    • Guidance calls for $90MM of upstream EBITDA in 2019.
    • RVRA will spend $66MM in capex although $52MM of that will be to drill new wells. The remaining $14MM will be maintenance capex.
  3. Management did not provide guidance for the Blue Mountain (the midstream business) and will provide it at a later point. Roan Resources (Blue Mountain’s anchor tenant) did not provide its 2019 drilling plan until late in February which didn’t give Blue Mountain enough time to finalize its 2019 outlook.
    • Blue Mountain’s second cryogenic plant looks indefinitely delayed. I discuss the implications to my valuation below.

Blue Mountain Second Cryogenic Stock is Indefinitely Delayed

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