

	UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549



	FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, ~~2018~~2019

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF SECURITIES

EXCHANGE ACT OF 1934

For the transition period from __________ to ___________

Commission File Number: 001-32720



	Roan Resources, Inc.
	(Exact Name of Registrant as Specified in its Charter)

Delaware		83-1984112
(State or Other Jurisdiction of Incorporation)		(IRS Employer Identification No.)

14701 Hertz Quail Springs Pkwy Oklahoma City, OK		73134
(Address of Principal Executive Offices)		(Zip Code)
(405) 896-8050
(Registrant’s Telephone Number, including Area Code)

~~Linn Energy, Inc.~~ ~~600 Travis Street~~ ~~Houston, Texas 77002~~
~~(Former~~
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol	Name ~~or Former Address, If Changed Since Last Report)~~of Each Exchange on Which Registered
Class A Common Stock, par value $0.001 per share	ROAN	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12 b-2 of the Exchange Act. (Check One):



Large Accelerated Filer ¨		Accelerated Filer ¨
Non-Accelerated Filer x		Smaller Reporting Company ¨
		Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No ¨

As of November ~~9, 2018,~~4, 2019, there were ~~152,539,532~~154,333,746 shares of Class A common stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS



Cautionary Note Regarding Forward-Looking Statements			1
Glossary of Oil and Natural Gas Terms			23

PART I - FINANCIAL INFORMATION
	Item 1. Financial Statements		57
		Condensed Consolidated Balance Sheets	57
		Condensed Consolidated Statements of Operations	68
		Condensed Consolidated ~~Statement~~Statements of Changes in Equity	79
		Condensed Consolidated Statements of Cash Flows	810
		Notes to Unaudited Condensed Consolidated Financial Statements	1011
	Item 2. Management's Discussion and Analysis of Financial Condition and ~~Result~~Results of Operations		2733
	Item 3. Quantitative and Qualitative Disclosures About Market Risk		4450
	Item 4. Controls and Procedures		4552
PART II - OTHER INFORMATION
	Item 1. Legal Proceedings		4754
	Item 1A. Risk Factors		4754
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		4857
	Item 3. Defaults Upon Senior Securities		4857
	Item 4. Mine Safety Disclosure		4858
	Item 5. Other Information		4858
	Item 6. Exhibits		4959
	Signatures		5161

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on management’s current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” in our ~~Current~~Annual Report on Form ~~8-K~~10-K for the year ended December 31, 2018 (our “Annual Report on Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”~~) on September 24, 2018 (the “Current Report”~~) and in Part II, Item 1A. “Risk Factors” of this Quarterly Report.

Forward-looking statements may include statements about:

the satisfaction of the conditions precedent to the consummation of the proposed Merger (as defined herein), including the receipt of stockholder and regulatory approvals;

unanticipated difficulties or expenditures relating to the proposed Merger;

legal proceedings, judgments or settlements, including those that may be instituted against the Company, the board of directors of the Company, the Company’s executive officers and others following the announcement of the proposed Merger;

disruptions of current plans and operations caused by the announcement and pendency of the proposed Merger;

potential difficulties in employee retention due to the announcement and pendency of the proposed Merger;

the response of customers, distributors, suppliers, business partners and regulators to the announcement of the proposed Merger;

our business strategy;

our reserves;

our drilling plans, prospects, inventories, projects and programs;

our ability to replace the reserves we produce through drilling and property acquisitions;

our financial strategy, liquidity and capital required for our drilling program and timing related thereto;

our realized oil, natural gas and NGL prices;

the timing and amount of our future production of oil, natural gas and NGLs;

our competition and government regulations;

our ability to obtain permits and governmental approvals;

our pending legal or environmental matters;

our marketing of oil, natural gas and NGLs;

our leasehold or business acquisitions;

our costs of developing our properties;

our hedging strategy and results;

general economic conditions;

credit markets;

uncertainty regarding our future operating results including initial production values and liquid yields in our type curve areas;

the costs, terms and availability of gathering, processing, fractionation and other midstream services; and

our plans, objectives, expectations and intentions that are not historical.

These forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incidental to the development, production, gathering and sale of oil, natural gas and NGLs. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating reserves and in projecting future rates of production, cash flow and

access to capital, the timing of development expenditures and the other risks described in Part II, Item 1A. “Risk Factors” of this Quarterly Report.

GLOSSARY OF OIL AND NATURAL GAS TERMS

The following are abbreviations and definitions of certain terms used in this document, which are commonly used in the oil and natural gas industry:

Analogous reservoir. Analogous reservoirs, as used in resources assessments, have similar rock and fluid properties, reservoir conditions (depth, temperature and pressure) and drive mechanisms, but are typically at a more advanced stage of development than the reservoir of interest and thus may provide concepts to assist in the interpretation of more limited data and estimation of recovery. When used to support proved reserves, an analogous reservoir refers to a reservoir that shares the following characteristics with the reservoir of interest: (i) same geological formation (but not necessarily in pressure communication with the reservoir of interest); (ii) same environment of deposition; (iii) similar geological structure; and (iv) same drive mechanism. For a complete definition of analogous reservoir, refer to the SEC’s Regulation S-X, Rule 4-10(a)(2).

Basin. A large natural depression on the earth’s surface in which sediments, generally brought by water, accumulate.

Bbl. One stock tank barrel of 42 U.S. gallons liquid volume used herein in reference to crude oil, condensate or NGLs.

Boe. One barrel of oil equivalent, calculated by converting natural gas to oil equivalent barrels at a ratio of six Mcf of natural gas to one Bbl of oil. This is an energy content correlation and does not reflect a value or price relationship between the commodities.

Btu. British thermal unit. The quantity of heat required to raise the temperature of a one pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

Completion. Preparation of a well bore and installation of permanent equipment for production of oil, natural gas or NGLs or, in the case of a dry well, reporting to the appropriate authority that the well has been abandoned.

Condensate. A mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when produced, is in the liquid phase at surface pressure and temperature.

Development costs. Costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and natural gas. For a complete definition of development costs, refer to the SEC’s Regulation S-X, Rule 4-10(a)(7).

Development project. The means by which petroleum resources are brought to the status of economically producible. As examples, the development of a single reservoir or field, an incremental development in a producing field or the integrated development of a group of several fields and associated facilities with a common ownership may constitute a development project.

Differential. An adjustment to the price of oil or natural gas from an established spot market price to reflect differences in the quality and/or location of oil or natural gas.

Dry well. A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes.

Economically producible. The term economically producible, as it relates to a resource, means a resource which generates revenue that exceeds, or is reasonably expected to exceed, the costs of the operation. For a complete definition of economically producible, refer to the SEC’s Regulation S-X, Rule 4-10(a)(10).

Field. An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations. For a complete definition of field, refer to the SEC’s Regulation S-X, Rule 4-10(a)(15).

Formation. A layer of rock which has distinct characteristics that differs from nearby rock.

Gross acres or gross wells. The total acres or wells, as the case may be, in which a working interest is owned.

Held by production or HBP. Acreage covered by a mineral lease that perpetuates a company’s right to operate a property as long as the property produces a minimum paying quantity of oil or natural gas.

Liquids. Describes oil, condensate and natural gas liquids.

~~MBbl~~MBbls. One thousand barrels of crude oil, condensate or NGLs.

MBoe. One thousand Boe.

MBoe/d. One thousand Boe per day.

Mcf. One thousand cubic feet of natural gas.

MMBtu. One million British thermal units.

MMcf. One million cubic feet of natural gas.

Net acres. The percentage of total acres an owner has out of a particular number of acres, or a specified tract. An owner who has 50% working interest in 100 acres owns 50 net acres.

Net production. Production that is owned by us less royalties and production due to others.

NGLs or Natural gas liquids. Hydrocarbons found in natural gas which may be extracted as liquefied petroleum gas and natural gasoline.

NYMEX. The New York Mercantile Exchange.

Operator. The individual or company responsible for the development and/or production of an oil or natural gas well or lease.

Play. A geographic area with hydrocarbon potential.

Production costs. Costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. For a complete definition of production costs, refer to the SEC’s Regulation S-X, Rule 4-10(a)(20).

Prospect. A specific geographic area which, based on supporting geological, geophysical or other data and also preliminary economic analysis using reasonably anticipated prices and costs, is deemed to have potential for the discovery of commercial hydrocarbons.

Proved developed reserves. Reserves that can be expected to be recovered through (i) existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well or (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.

Proved properties. Properties with proved reserves.

Proved reserves. Those quantities of oil, natural gas and NGLs, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible-from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations-prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time. For a complete definition of proved oil and natural gas reserves, refer to the SEC’s Regulation S-X, Rule 4-10(a)(22).

Proved undeveloped reserves or PUDs. Proved reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage shall be limited to those directly offsetting development spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes reasonable certainty of economic producibility at greater distances. Undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. Under no circumstances shall estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable certainty.

Realized price. The cash market price less all expected quality, transportation and demand adjustments.

Reasonable certainty. A high degree of confidence that quantities will be recovered. For a complete definition of reasonable certainty, refer to the SEC’s Regulation S-X, Rule 4-10(a)(24).

Recompletion. The completion for production of an existing wellbore in another formation from that which the well has been previously completed.

Reliable technology. Reliable technology is a grouping of one or more technologies (including computational methods) that has been field tested and has been demonstrated to provide reasonably certain results with consistency and repeatability in the formation being evaluated or in an analogous formation.

Reserves. Estimated remaining quantities of oil and natural gas and related substances anticipated to be economically producible, as of a given date, by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce or a revenue interest in the production, installed means of delivering oil and natural gas or related substances to market and all permits and financing required to implement the project. Reserves should not be assigned to adjacent reservoirs isolated by major, potentially sealing, faults until those reservoirs are penetrated and evaluated as economically producible. Reserves should not be assigned to areas that are clearly separated from a known accumulation by a non-productive reservoir (i.e., absence of reservoir, structurally low reservoir or negative test results). Such areas may contain prospective resources (i.e., potentially recoverable resources from undiscovered accumulations).

Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil and/or natural gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.

Resources. Quantities of oil and natural gas estimated to exist in naturally occurring accumulations. A portion of the resources may be estimated to be recoverable and another portion may be considered to be unrecoverable. Resources include both discovered and undiscovered accumulations.

Spacing. The distance between wells producing from the same reservoir. ~~Spacing is often expressed in terms of acres, e.g., 40-acre spacing, and is often established by regulatory agencies.~~

~~Success rate. The percentage of wells drilled which produce hydrocarbons in commercial quantities.~~

Unproved properties. Properties with no proved reserves.

Wellbore. The hole drilled by the bit that is equipped for oil, natural gas and NGL production on a completed well. Also called well or borehole.

Working interest. The right granted to the lessee of a property to develop and produce and own natural gas or other minerals. The working interest owners bear the exploration, development and operating costs on either a cash, penalty or carried basis.

Workover. Operations on a producing well to restore or increase production.

WTI. West Texas Intermediate.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Roan Resources, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

September 30, 2018 December 31, 2017
(in thousands, except par value and share data)
ASSETS
Current assets
Cash and cash equivalents $ 3,900
$ 1,471
Accounts receivable
Oil, natural gas and natural gas liquid sales 47,365
74,527
Affiliates 14,689
4,695
Joint interest owners and other 110,991
320
Prepaid drilling advances 49,279
—
Derivative contracts 203
152
Other current assets 6,412
930
Total current assets 232,839
82,095
Noncurrent assets
Oil and natural gas properties, successful efforts method 2,429,892
1,876,951
Accumulated depreciation, depletion, amortization and impairment (183,557 ) (78,307 )
Oil and natural gas properties, net 2,246,335
1,798,644
Other property and equipment, net 2,935
1,147
Deferred financing costs 4,417
2,710
Derivative contracts —
996
Total assets $ 2,486,526
$ 1,885,592
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 198,020
$ 10,245
Accounts payable and accrued liabilities – Affiliates 7,748
183,820
Revenue payable 88,029
—
Drilling advances 57,374
—
Derivative contracts 64,261
9,279
Asset retirement obligations 535
—
Total current liabilities 415,967
203,344
Noncurrent liabilities
Long-term debt 394,639
85,339
Deferred tax liabilities 299,662
—
Asset retirement obligations 12,876
10,769
Derivative contracts 18,901
1,371
Other 662
—
Total liabilities 1,142,707
300,823
Commitments and contingencies (Note 14)

Equity
Common stock, $0.001 par value; 800,000,000 shares authorized; 152,539,532 shares issued and outstanding at September 30, 2018 153
—
Preferred stock, $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding at September 30, 2018 —
—
Additional paid-in capital 1,643,431
—
Accumulated deficit (299,765 ) —
Members’ equity —
1,584,769
Total equity 1,343,819
1,584,769
Total liabilities and equity $ 2,486,526
$ 1,885,592

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~Roan Resources, Inc.~~

~~Condensed Consolidated Statements of Operations (Unaudited)~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
(in thousands, except per share amounts)
Revenues
   Oil sales
$ 74,987
$ 16,701
$ 197,356
$ 45,702
   Natural gas sales
10,442
11,818
31,900
29,857
Natural gas sales – Affiliates 7,617
1,027
17,056
1,027
   Natural gas liquid sales
12,983
9,224
38,127
21,199
Natural gas liquid sales – Affiliates 14,123
850
27,250
850
(Loss) gain on derivative contracts (36,704 ) 131 (100,920 ) 2,385
Total revenues 83,448
39,751
210,769
101,020
Operating Expenses
Production expenses 14,737
4,336
30,111
10,450
Gathering, transportation and processing —
4,890
—
11,360
Production taxes 6,210
847
10,892
2,057
Exploration expenses 11,646
4,229
30,129
4,475
Depreciation, depletion, amortization and accretion 37,164
10,824
83,630
22,176
General and administrative 13,177
4,489
40,283
22,062
Gain on sale of oil and natural gas properties —
(838 ) —
(838 )
Total operating expenses 82,934
28,777
195,045
71,742
Total operating income 514
10,974
15,724
29,278
Other income (expense)
Interest expense, net (2,092)
(264)
(4,978)
(441)
Net (loss) income before income taxes (1,578 ) 10,710
10,746
28,837
Income tax expense 299,662
—
299,662
—
Net (loss) income $ (301,240 ) $ 10,710
$ (288,916 ) $ 28,837
Earnings (loss) per share
Basic $ (1.97 ) $ 0.11
$ (1.90 ) $ 0.35
Diluted $ (1.97 ) $ 0.11
$ (1.90 ) $ 0.35
Weighted average number of shares outstanding
Basic 152,540
99,859
152,129
83,578
Diluted 152,540
99,859
152,129
83,578

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~Roan Resources, Inc.~~

~~Condensed Consolidated Statement of Changes in Equity (Unaudited)~~

Stockholders' Equity
Common Stock (Shares) Common Stock Additional Paid-in Capital Accumulated Deficit Members' Equity Total Equity
(in thousands)
Balance at December 31, 2017 —
$ —
$ —
$ —
$ 1,584,769
$ 1,584,769
Acquisition of oil and natural gas properties in exchange for equity units —
—
—
—
39,906
39,906
Equity-based compensation ⁽¹⁾
—
—
192
—
7,868
8,060
Net loss ⁽¹⁾
—
—
—
(299,765 ) 10,849
(288,916 )
Issuance of common stock upon Reorganization 152,540
153
1,643,239
—
(1,643,392 ) —
Balance at September 30, 2018 152,540
$ 153
$ 1,643,431
$ (299,765 ) $ —
$ 1,343,819

⁽¹⁾~~Amounts are allocated to stockholders' equity and members' equity to reflect the Reorganization. See~~ ~~Note 10 – Equity~~ ~~for discussion of the Reorganization.~~



	September 30, 2019			December 31, 2018
	(in thousands, except par value and share data)
ASSETS
Current assets
Cash and cash equivalents	$	3,464		$	6,883
Accounts receivable
Oil, natural gas and natural gas liquid sales, net	41,635			55,564
Joint interest owners and other, net	146,449			133,387
Affiliates	2,684			9,669
Prepaid drilling advances	3,898			28,977
Derivative contracts	47,840			82,180
Other current assets	5,922			6,655
Total current assets	251,892			323,315
Noncurrent assets
Oil and natural gas properties, successful efforts method	3,040,279			2,628,333
Accumulated depreciation, depletion, amortization and impairment	(400,710		)	(230,836		)
Oil and natural gas properties, net	2,639,569			2,397,497
Derivative contracts	18,794			20,638
Other	11,780			7,659
Total assets	$	2,922,035		$	2,749,109
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	67,821		$	49,746
Accrued liabilities	84,716			176,494
Accounts payable and accrued liabilities – Affiliates	7,721			8,577
Revenue payable	99,623			97,963
Drilling advances	15,885			31,058
Derivative contracts	—			845
Other current liabilities	2,666			790
Total current liabilities	278,432			365,473
Noncurrent liabilities
Long-term debt	732,639			514,639
Long-term debt, net - Affiliates	45,595			—
Deferred tax liabilities, net	353,274			356,862
Asset retirement obligations	17,887			16,058
Derivative contracts	—			141
Other	5,661			902
Total liabilities	1,433,488			1,254,075
Commitments and contingencies (Note 14)
Equity
Class A common stock, $0.001 par value; 800,000,000 shares authorized; 154,333,746 shares issued and outstanding at September 30, 2019 and 152,539,532 shares issued and outstanding at December 31, 2018	154			153
Preferred stock, $0.001 par value; 50,000,000 shares authorized; no shares issued and outstanding at September 30, 2019 or December 31, 2018	—			—
Additional paid-in capital	1,651,556			1,646,401
Treasury stock, at cost	(128		)	—
Accumulated deficit	(163,035		)	(151,520		)
Total equity	1,488,547			1,495,034
Total liabilities and equity	$	2,922,035		$	2,749,109

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Roan Resources, Inc.

Condensed Consolidated Statements of ~~Cash Flows~~Operations (Unaudited)

Nine Months Ended
September 30,
2018 2017
(in thousands)
Cash flows from operating activities
Net (loss) income $ (288,916 ) $ 28,837
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion 83,630
22,176
Unproved leasehold amortization and impairment and dry hole expense 25,642
4,475
Gain on sale of oil and natural gas properties —
(838 )
Amortization of deferred financing costs 571
39
Amortization of deferred rent 662
—
Loss (gain) on derivative contracts 100,920
(2,385 )
Net cash (paid) received upon settlement of derivative contracts (27,462 ) 2,385
Equity-based compensation 8,060
—
Deferred income taxes 299,662
—
Other (111 ) (8 )
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable – Oil, natural gas and natural gas liquid sales 27,162
(10,820 )
Accounts receivable – Affiliates (9,994 ) (1,877 )
Accounts receivable – Joint interest owners and other (110,671 ) (8,410 )
Prepaid drilling advances (55,815 ) —
Other current assets (5,398 ) (1,805 )
Accounts payable and accrued liabilities 37,773
37,816
Accounts payable and accrued liabilities – Affiliates (24,474 ) 1,913
Drilling advances 57,374
(25,363 )
Revenue payable 88,029
13,113
Net cash provided by operating activities 206,644
59,248
Cash flows from investing activities
Acquisition of oil and natural gas properties (22,935 ) (42,701 )
Capital expenditures for oil and natural gas properties (485,580 ) (138,152 )
Acquisition of other property and equipment (2,353 ) (153 )
Proceeds from sale of oil and natural gas properties —
1,435
Purchase of investment —
(3,000 )
Net cash used in investing activities (510,868 ) (182,571 )
Cash flows from financing activities
Proceeds from borrowings 309,300
75,340
Repayment of borrowings —
(40,000 )
Deferred financing costs (2,279 ) (2,340 )
Deferred offering costs (368 )
—
Contributions from Citizen members —
95,557
Distributions to Citizen members —
(11,147 )
Net cash provided by financing activities 306,653
117,410
Net increase (decrease) in cash and cash equivalents 2,429
(5,913 )
Cash and cash equivalents, beginning of period 1,471
6,853
Cash and cash equivalents, end of period $ 3,900
$ 940



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(in thousands, except per share amounts)
Revenues
Oil sales	$	70,371		$	74,987		$	200,138		$	197,356
Natural gas sales	7,114			10,442			24,962			31,900
Natural gas sales – Affiliates	4,070			7,617			21,092			17,056
Natural gas liquid sales	6,901			12,983			23,721			38,127
Natural gas liquid sales – Affiliates	3,924			14,123			18,126			27,250
Gain (loss) on derivative contracts	40,675			(36,704		)	(5,913		)	(100,920		)
Total revenues	133,055			83,448			282,126			210,769
Operating Expenses
Production expenses	7,439			14,737			29,008			30,111
Production expenses - Affiliates	5,431			—			10,011			—
Production taxes	4,839			6,210			14,943			10,892
Exploration expenses	14,578			11,646			38,472			30,129
Depreciation, depletion, amortization and accretion	55,504			37,164			141,969			83,630
General and administrative	8,752			13,177			36,888			40,283
Gain on sale of other assets	(31		)	—			(645		)	—
Total operating expenses	96,512			82,934			270,646			195,045
Total operating income	36,543			514			11,480			15,724
Other income (expense)
Interest expense, net	(9,051		)	(2,092		)	(24,230		)	(4,978		)
Interest expense - Affiliates	(2,317		)	—			(2,344		)	—
Other	18			—			(10		)	—
Net income (loss) before income taxes	25,193			(1,578		)	(15,104		)	10,746
Income tax expense (benefit)	5,898			299,662			(3,589		)	299,662
Net income (loss)	$	19,295		$	(301,240	)	$	(11,515	)	$	(288,916	)
Earnings (loss) per share
Basic	$	0.13		$	(1.97	)	$	(0.08	)	$	(1.90	)
Diluted	$	0.13		$	(1.97	)	$	(0.08	)	$	(1.90	)
Weighted average number of shares outstanding
Basic	154,150			152,540			153,104			152,129
Diluted	154,150			152,540			153,104			152,129

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Roan Resources, Inc.

Condensed Consolidated Statements of ~~Cash Flows~~Changes in Equity (Unaudited)~~, continued~~

Nine Months Ended
September 30,
2018 2017
(in thousands)
Supplemental disclosure of cash flow information
Cash paid for interest, net of capitalized interest $ 4,024
$ 341
Supplemental disclosure of non-cash investing and financing activities
Change in accrued capital expenditures $ 38,593
$ 22,456
Acquisition of oil and natural gas properties for equity $ 39,906
$ 1,281,743
Distribution to Citizen Members of assets and liabilities $ —
$ (74,467 )



	Stockholders’ Equity
	Common Stock (Shares)	Common Stock		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Members’ Equity			Total Equity
	(in thousands)
Balance at December 31, 2017	—	$	—	$	—		$	—		$	—		$	1,584,769		$	1,584,769
Acquisition of oil and natural gas properties in exchange for equity units	—	—		—			—			—			39,906			39,906
Equity-based compensation	—	—		—			—			—			2,292			2,292
Net income	—	—		—			—			—			35,081			35,081
Balance at March 31, 2018	—	$	—	$	—		$	—		$	—		$	1,662,048		$	1,662,048
Equity-based compensation	—	—		—			—			—			2,835			2,835
Net loss	—	—		—			—			—			(22,757		)	(22,757		)
Balance at June 30, 2018	—	$	—	$	—		$	—		$	—		$	1,642,126		$	1,642,126
Equity-based compensation ⁽¹⁾	—	—		192			—			—			2,741			2,933
Net loss ⁽¹⁾	—	—		—			(299,765		)	—			(1,475		)	(301,240		)
Issuance of common stock upon Reorganization	152,540	153		1,643,239			—			—			(1,643,392		)	—
Balance at September 30, 2018	152,540	$	153	$	1,643,431		$	(299,765	)	$	—		$	—		$	1,343,819
⁽¹⁾ Amounts were allocated to stockholders’ equity and members’ equity to reflect the Reorganization. See Note 10 – Equity for discussion of the Reorganization.

Balance at December 31, 2018	152,540	$	153	$	1,646,401		$	(151,520	)	$	—		$	—		$	1,495,034
Equity-based compensation	—	—		3,065			—			—			—			3,065
Net loss	—	—		—			(58,056		)	—			—			(58,056		)
Balance at March 31, 2019	152,540	$	153	$	1,649,466		$	(209,576	)	$	—		$	—		$	1,440,043
Issuance of common stock in connection with Term Loan	1,525	1		2,317			—			—			—			2,318
Equity-based compensation	—	—		(3,222		)	—			—			—			(3,222		)
Net income	—	—		—			27,246			—			—			27,246
Balance at June 30, 2019	154,065	$	154	$	1,648,561		$	(182,330	)	$	—		$	—		$	1,466,385
Vesting of restricted stock units	269	—		—			—			—			—			—
Purchase of treasury stock	—	—		—			—			(128		)	—			(128		)
Equity-based compensation	—	—		2,995			—			—			—			2,995
Net income	—	—		—			19,295			—			—			19,295
Balance at September 30, 2019	154,334	$	154	$	1,651,556		$	(163,035	)	$	(128	)	$	—		$	1,488,547

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Roan Resources, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)



	Nine Months Ended September 30,
	2019			2018
	(in thousands)
Cash flows from operating activities
Net loss	$	(11,515	)	$	(288,916	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion	141,969			83,630
Unproved leasehold amortization and impairment	35,932			25,642
Gain on sale of other assets	(645		)	—
Amortization of deferred financing costs	2,332			571
Loss on derivative contracts	5,913			100,920
Net cash received (paid) upon settlement of derivative contracts	20,006			(27,462		)
Equity-based compensation	2,838			8,060
Deferred income taxes	(3,589		)	299,662
Other	4,110			551
Changes in operating assets and liabilities increasing (decreasing) cash:
Accounts receivable and other assets	(31,775		)	(154,716		)
Accounts payable and other liabilities	4,422			158,702
Net cash provided by operating activities	169,998			206,644
Cash flows from investing activities
Acquisition of oil and natural gas properties	—			(22,935		)
Capital expenditures for oil and natural gas properties	(447,433		)	(485,580		)
Acquisition of other property and equipment	(83		)	(2,353		)
Proceeds from sale of other assets	1,475			—
Net cash used in investing activities	(446,041		)	(510,868		)
Cash flows from financing activities
Proceeds from borrowings	263,000			309,300
Proceeds from borrowings - Affiliates	48,750			—
Repayment of borrowings	(45,000		)	—
Other	5,874			(2,647		)
Net cash provided by financing activities	272,624			306,653
Net (decrease) increase in cash and cash equivalents	(3,419		)	2,429
Cash and cash equivalents, beginning of period	6,883			1,471
Cash and cash equivalents, end of period	$	3,464		$	3,900

Supplemental disclosure of cash flow information
Cash paid for interest, net of capitalized interest	$	22,172		$	4,024

Supplemental disclosure of non-cash investing and financing activities
Change in accrued capital expenditures	$	(61,408	)	$	38,593
Acquisition of oil and natural gas properties for equity	$	—		$	39,906
Right of use assets obtained in exchange for operating lease liabilities	$	6,336		$	—
Issuance of common stock in connection with Term Loan	$	2,317		$	—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1 – Business and Organization

Roan Resources, Inc. (“Roan Inc.” or the “Company”) was formed in September 2018 to facilitate a reorganization and to become the holding company for Roan Resources LLC (“Roan LLC”). In September 2018, a series of transactions were executed with Roan ~~LLC's~~LLC’s members which resulted in Roan LLC becoming a wholly owned subsidiary of Roan Inc. These transactions are hereafter referred to as the ~~“Reorganization” and Roan Inc. with its subsidiaries are collectively referred to as the “Company.~~“Reorganization.” See Note 10 – Equity for further discussion of the Reorganization transaction. The accompanying historical financial statements ~~through~~for the ~~date of Reorganization~~three and nine months ended September 30, 2018 are the financial statements of Roan LLC, our accounting predecessor. Following the Reorganization, the historical financial statements are the results of Roan Inc.

Roan LLC was initially formed by Citizen Energy II, LLC (“Citizen”) in May 2017. On August 31, 2017, ~~the Companyexecuted~~ a contribution agreement (the “Contribution Agreement”) by and among Roan LLC, Citizen, Linn Energy Holdings, LLC (“LEH”) and Linn Operating, LLC ~~(“LOI”, and together~~(together with LEH, “Linn”) was executed, pursuant to which, among other things, Citizen and Linn agreed to contribute oil and natural gas properties within an area-of-mutual-interest to ~~the Company~~Roan LLC (collectively the “Contribution”). In exchange for their contributions, Citizen and Linn each received a 50% equity interest in ~~the Company.~~

~~The contributions of oil and natural gas properties to~~ Roan LLC by Citizen and Linn were determined to meet the definition of a business. However, as Roan LLC had no assets or operations prior to the Contribution, it was determined that Citizen was the acquirer for accounting purposes in accordance with ASC Topic 805, ~~Business Combinations (~~“~~ASC 805~~”). As a result, the information in the accompanying financial statements and footnotes for the period prior to the Contribution reflects the historical results of Citizen. Citizen was formed in July 2014 to engage in the acquisition, exploration, development, production, and sale of oil and natural gas properties located in Central Oklahoma. Subsequent to the Contribution, the information in the accompanying financial statements and footnotes reflects the results of Roan LLC and after the Reorganization, the results of Roan Inc. See ~~Note 4 – Acquisitions~~ ~~for additional discussion of the business combination of the oil and natural gas properties contributed by Linn.~~LLC. In conjunction with the Contribution Agreement, ~~the Company~~Roan LLC entered into ~~master~~management services agreements with both Citizen and Linn (“MSAs”). See Note 12 –Transactions with Affiliates for additional discussion of the MSAs and transactions with Citizen and Linn.

The Company was formed to engage in the acquisition, exploration, development, production, and sale of oil and natural gas reserves. The Company’s oil and natural gas properties are located in Central Oklahoma. The Company’s corporate headquarters is located in Oklahoma City, Oklahoma.

On October 1, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Citizen Energy Operating, LLC, a Delaware limited liability company (“Citizen Operating”), Citizen Energy Pressburg, Inc., a Delaware corporation and wholly owned subsidiary of Citizen Operating (“Merger Sub”) and the Company. The Merger Agreement provides for, among other things, the merger of the Company into Merger Sub with the Company as the surviving entity and a wholly owned subsidiary of Citizen Operating (the “Merger”). See Note 15 – Subsequent Eventsfor additional discussion of the merger transaction.

Note 2 – Summary of Significant Accounting Policies

For a description of the Company’s significant accounting policies, refer to Note 2 to the Company’s ~~2017~~2018 audited financial statements included in the ~~Current Report.~~Annual Report on Form 10-K. The accompanying condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Certain amounts in the prior period financial statements have been reclassified to conform to the 2019 presentation. These reclassifications had no impact on net income (loss), total stockholders’ equity or total cash flows.

Principles of Consolidation

The condensed consolidated financial statements of the Company include the accounts of Roan Inc. and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Interim Financial Statements

The accompanying condensed consolidated financial statements as of December 31, ~~2017~~2018 were derived from the annual financial statements included in the ~~Current Report.~~Annual Report on Form 10-K. The unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 were prepared by the Company in accordance with the accounting policies stated in the audited financial statements. In the opinion of management, the Company’s unaudited condensed consolidated financial statements reflect all known adjustments necessary to fairly state the financial position of the Company and its results of operations and cash flows for such periods. All such adjustments are of a normal, recurring nature. Certain information and disclosures normally included in financial statements prepared in conformity with GAAP have been consolidated or omitted, although the Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s annual financial statements and notes thereto.

~~Income Taxes~~

The Company is a corporation and therefore a taxable entity. As a result of the Reorganization, the Company recorded a deferred tax liability based on the change in tax status. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates applicable to the future period when those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period the rate change is enacted. A valuation allowance is provided for deferred tax assets when it is more likely than not the deferred tax assets will not be realized. See ~~Note 13 – Income Taxesfor further information on the Company’s taxes.~~

Use of Estimates

The preparation of financial statements and related footnotes in conformity with GAAP requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. A significant item that requires management’s estimates and assumptions is the estimate of proved oil, natural gas and NGL reserves which are used in the calculation of depletion of the Company’s oil and natural gas properties and impairment, if any, of proved oil and natural gas properties. Changes in estimated quantities of its reserves could impact the Company’s reported financial results as well as disclosures regarding the quantities and value of proved oil and natural gas reserves. Although management believes these estimates are reasonable, actual results could differ from these estimates.

Recent Accounting Standards Issued

In ~~May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (“ASC 606”). This guidance supersedes most of the existing revenue recognition requirements in GAAP and requires (i) an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services and (ii) requires expanded disclosures regarding the nature, amount, timing and certainty of revenue and cash flows from contracts with customers. Subsequent to the issuance of ASU 2014-09, the FASB issued additional guidance to assist entities with implementation efforts, including the issuance of ASU 2016-08, ~~Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)~~ ~~(“ASU 2016-08”), pertaining to the presentation of revenues on a gross basis~~

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

(revenues presented separately from associated expenses) versus a net basis. This guidance requires an entity to record revenue on a gross basis if it controls a promised good or service before transferring it to a customer, whereas an entity records revenue on a net basis if its role is to arrange for another entity to provide the goods or services to a customer. Applying the guidance in ASU 2016-08 requires significant judgment in determining the point in time when control of products transfers to customers. Effective January 1, 2018, the Company adopted ASC 606 using the modified retrospective method of transition under which the standard is applied only to the most current period presented. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard. See ~~Note 3 – Revenue from Contracts with Customers~~ ~~for discussion of the impact upon adoption and the additional disclosures.~~

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“~~ASU 2016-02”~~ASC 842”). This update applies to any entity that enters into a lease, with some specified scope exemptions. Under this update, a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. While there were no major changes to the lessor accounting, changes were made to align key aspects with the revenue recognition guidance. ~~This update will be effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years, with early application permitted.~~ The Company enters into lease agreements to support its operations, such as office space, vehicles and drilling rigs. ASU 2016-02 will not impact the accounting or financial presentation of the Company’s mineral leases. The Company plans to adoptadopted the new standard using the simplified transition method described in ASU 2018-11 Leases (Topic 842): Targeted Improvements~~, and therefore will apply the new standard~~ as of January 1, 2019 and ~~will recognize a cumulative-effect adjustment to the opening balance of retained earnings, if any, upon adoption in lieu of~~did not retrospectively ~~applying~~apply the new standard to periods before adoption. Accordingly, comparative information has not been adjusted and continues to be reported under the previous leasing standard. See Note 3 - Lease Accounting for additional information on the adoption of ASC 842.

Note 3 - Lease Accounting

The Company ~~is working~~adopted ASC 842 on January 1, 2019 using the simplified transition method described in ASU 2018-11 Leases (Topic 842): Targeted Improvements. Accordingly, comparative information was not adjusted and will continue to ~~complete~~be reported under the previous lease standard. The adoption did not require an adjustment to opening retained earnings for the cumulative effect adjustment. The Company further utilized the package of practical expedients within ASC 842 that allows an entity to not reassess the following prior to the effective date (i) whether any expired or existing contracts were or contained leases, (ii) the lease classification for any expired or existing leases or (iii) initial direct costs for any existing leases. The Company also elected

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

the practical expedient under ASU 2018-01 Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 that allows it to not evaluate existing or expired land easements not previously accounted for as leases prior to the effective date. Finally, the Company has elected the short-term lease recognition exemption for all leases that qualify and the practical expedient to not separate lease and non-lease components for all asset classes with multiple component types.

The Company enters into lease agreements to support its ~~evaluation~~operations, such as office space, drilling rigs and field equipment. ASC 842 does not impact the accounting or financial presentation of the Company’s mineral leases and also does not apply to leases used in the exploration or use of oil and natural gas, including the rights to explore for those natural resources and rights to use the land in which those natural resources are contained.

To facilitate compliance with ASC 842, the Company evaluated its existing lease arrangements and enhanced its systems, processes and internal controls to identify, track and record applicable leases. The implementation and adoption of this standard resulted in the Company recognizing right-of-use assets and lease liabilities for certain of its operating leases on the accompanying condensed consolidated balance sheet as of September 30, 2019. The Company has no finance leases. The following table shows the impact of ~~ASU 2016-02~~the adoption of ASC 842 on the Company’s current period balance sheet as compared to the previous lease accounting standard, ASC Topic 840, Leases (“ASC 840”):



	As of September 30, 2019
	Under ASC 842		Under ASC 840		Increase/(decrease)
	(in thousands)
Other noncurrent assets	$	5,312	$	—	$	5,312
Other current liabilities	$	1,892	$	—	$	1,892
Other noncurrent liabilities	$	4,444	$	1,024	$	3,420

Lease Accounting Policies

The Company determines if an arrangement is a lease at the inception of the arrangement by (i) identifying any assets within the contract (ii) determining whether the Company has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use and (iii) if the Company has the right to direct how and for what purpose the identified asset is used throughout the period of use. To the extent that it is determined that an arrangement represents a lease, the lease is classified as an operating lease or a finance lease. The Company capitalizes both lease classifications on its ~~financial statements, accounting policies,~~consolidated balance sheets through a right-of-use (“ROU”) asset and ~~internal controls, including implementation~~a corresponding lease liability. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating leases are included in other noncurrent assets, other current liabilities, and other noncurrent liabilities in the consolidated balance sheets. Operating lease ROU assets and liabilities are recognized at the commencement date of ~~systems~~an arrangement based on the present value of lease payments over the lease term. The operating lease ROU asset also includes any lease payments made to the lessor prior to lease commencement, less any lease incentives, and ~~processes~~initial direct costs incurred. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

Roan Resources, Inc.

Notes to ~~capture, classify and account for leases within the scope~~Unaudited Condensed Consolidated Financial Statements

Certain of the ~~new guidance~~Company’s lease agreements include lease and non-lease components. For all asset classes with multiple component types, the Company has utilized the practical expedient that exempts it from separating lease components from non-lease components. Accordingly, the Company accounts for the lease and non-lease components in an arrangement as a single lease component.

In addition, for all asset classes, the Company has made an accounting policy election not to apply the lease recognition requirements to its short-term leases (that is, a lease that, at commencement, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise). Accordingly, the Company recognizes lease payments related to its short-term leases in profit or loss on a straight-line basis over the lease term. To the extent that there are variable lease payments, the Company recognizes those payments in profit or loss in the period in which the obligation for those payments is incurred. Refer to “Nature of Leases” below for further information regarding those asset classes that include material short-term leases.

Nature of Leases

The Company leases certain office space, drilling rigs and field equipment under cancelable and non-cancelable leases to support our operations.

Office Buildings. The Company leases its corporate office space in Oklahoma City, Oklahoma and additional office space for its field location in Oklahoma. In general, the Company’s office lease agreements contain provisions to extend the lease and contain protective provisions that allow for early termination. Beginning in March 2019, the Company began paying its portion of the building’s operating expenses, as defined in the corporate office lease agreement. These expenses are considered variable leases payments, which were not included in the measurement of the lease liability. The Company’s office building leases are long term leases reflected under ASC 842 on the accompanying condensed consolidated balance sheet as of September 30, 2019.

Drilling Rigs. The Company enters into daywork contracts for drilling rigs with third party service contractors to support the development and exploitation of undeveloped reserves. All of the Company’s current drilling contracts have a term of one year or less.

Field Equipment. The Company rents various field equipment, including compressors, from third parties in order to facilitate its operations. Compressor arrangements are typically structured with a non-cancelable primary term of twelve months and continue thereafter on a month-to-month basis subject to termination by either party with thirty days’ notice. The Company has concluded that its compressor rental agreements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreement subsequent to the primary term. Other field equipment arrangements are typically structured on a month-to-month basis subject to termination by either party.

To the extent that field equipment rental arrangements have a primary term of twelve months or less, the Company has elected to apply the practical expedient for short-term leases. For those short-term arrangements, the Company does not apply the lease recognition requirements, and recognizes lease payments related to these arrangements in profit or loss on a straight-line basis over the lease term. Refer to the “Lease Accounting Policies” section above for discussion of practical expedients applied.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Discount Rate. The Company’s leases typically do not provide an implicit rate, and thus, it is required that the ~~related disclosures.~~Company use its incremental borrowing rate in determining the present value of lease payments based on the information available at commencement date. The Company’s incremental borrowing rate reflects the rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company uses the implicit rate in the limited circumstances in which that rate is readily determinable.

Note 34 – Revenue from Contracts with Customers

~~The Company adopted ASC 606 on January 1, 2018 using a modified retrospective approach, which only applies to contracts that were not completed as~~Revenues from the sale of the date of initial application. The adoption did not require an adjustment to opening retained earnings for the cumulative effect adjustment. The adoption does not have a material impact on the timing of the Company’s revenue recognition or its financial position, results of operations, net income, or cash flows, but does impact the Company’s presentation of revenuesoil, natural gas and ~~expenses under the gross-versus-net presentation guidance in ASU 2016-08.~~

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~The following table shows the impact of the adoption of ASC 606 on the Company’s current period results as compared to the previous revenue recognition standard, ASC Topic 605,~~ ~~Revenue Recognition~~ ~~(“ASC 605”):~~

Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Under ASC 606 Under ASC 605 Increase/ (decrease) Under ASC 606 Under ASC 605 Increase/ (decrease)
(in thousands)
Revenues
     Oil sales $ 74,987
$ 75,062
$ (75 ) $ 197,356
$ 197,431
$ (75 )
     Natural gas sales $ 18,059
$ 21,739
$ (3,680 ) $ 48,956
$ 60,919
$ (11,963 )
     Natural gas liquid sales $ 27,106
$ 35,195
$ (8,089 ) $ 65,377
$ 83,735
$ (18,358 )

Operating expenses
Gathering, transportation and processing $ —
$ 11,844
$ (11,844 ) $ —
$ 30,396
$ (30,396 )

Net loss $ (301,240 ) $ (301,240 ) $ —
$ (288,916 ) $ (288,916 ) $ —

~~Oil Sales~~

~~Most of the Company’s oil contracts transfer physical custody and title at or near the wellhead, which is commonly~~NGLs are recognized when control of the ~~oil~~product has been transferred to the ~~purchaser. The Company’s~~customer, all performance obligations have been satisfied and collectability is reasonably assured. We recognize revenues from the sale of oil, production is primarily sold under market-sensitive contracts that are typically priced at a differential to the NYMEX price. Any differentials incurred after the transfer of control of the oil are net against oil sales as they represent part of the transaction price of the contract. For its oil contracts, the Company generally records its sales based on the net amount received.

~~Natural Gas and NGL Sales~~

Most of the Company’s natural gas is sold at the wellhead or inlet to the processor’s facility, which is commonly when control of the natural gas has been transferred to the purchaser. The natural gas is sold under percentage of proceeds processing contracts. Under these contracts, the purchaser gathers the natural gas where it is produced and transports it via pipeline to natural gas processing plants where NGL products are extracted. The NGL products and remaining residue gas are then sold by the purchaser. Under the natural gas percentage of proceeds contracts, the Company receives a percentage of the value for the extracted NGLs and the residue gas.

~~For its natural gas processing contracts, the Company generally records its~~ natural gas and ~~NGL sales net of gathering, processing and transportation expenses~~NGLs based on ~~a principal versus agent assessment for individual contracts.~~our share of volumes sold.

Performance Obligations

The Company satisfies the performance obligations under its oil and natural gas sales contracts through delivery of its production and transfer of control to a customer. Upon delivery of production, the Company

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

has the right to receive consideration from its customers in amounts that correspond with the value of the production transferred. The Company typically receives payment for oil, natural gas and NGL sales within 30 days of the month of delivery for operated properties and within 90 days of the month of delivery for non-operated properties.

The Company’s oil sales contracts are short-term in nature with a contract term of one year or less. For those contracts, the Company utilized the practical expedient in Revenue from Contracts with Customers (Topic 606) (“ASC ~~606,~~606”), which provides an exemption from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

For the Company’s natural gas and NGL sales contracts that have a contract term greater than one year, the Company utilized the practical expedient in ASC 606 which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required.

Contract Balances

The Company recognizes sales of oil, natural gas, and NGLs at a point in time when it satisfies a performance obligation and at that point the Company has an unconditional right to receive payment. Accordingly, these contracts do not give rise to contract assets or contract liabilities under ASC 606. The Company had accounts receivable related to revenue from contracts with customers ~~of approximately $62.1 million~~ as of September 30, ~~2018~~2019, and December 31, 2018 of approximately $44.3 million and $65.2 million, respectively, which represent this unconditional right to receive payment.

Prior Period Performance Obligations

To record revenues for oil, natural gas and NGLs, the Company estimates the amount of production delivered at the end of each month and the prices expected to be received for those sales. Differences between estimated revenues and actual amounts received for all prior months are recorded in the month payment is received

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

from the customer. For the three and nine months ended September 30, 2019 and 2018, revenue recognized related to performance obligations satisfied in prior reporting periods was not material.

~~Note 4 – Acquisitions~~

~~Linn Acquisition~~

~~As noted in~~ ~~Note 1 – Business and Organization~~, in connection with the Contribution, Roan LLC acquired from Linn certain oil and natural gas properties located in Central Oklahoma (the “Linn Acquisition”). In exchange for the contributed oil and natural gas properties, Linn received a 50% equity interest in Roan LLC valued at approximately $1.3 billion based on the value of the business. Accordingly, the fair value of the Company was primarily comprised of the fair value of these contributed oil and natural gas properties. See ~~Note 10 – Equity~~ ~~for further discussion of the equity issued to Linn.~~

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

Because the Linn Acquisition was determined to be a business combination as the acquired oil and natural gas properties met the definition of a business, the acquired assets and liabilities were recorded at fair value as of August 31, 2017, the acquisition date. The following assumptions were used to determine the fair value of the oil and natural gas properties:



~~Discount rate~~	~~9.50~~	%
~~Reserve risk factor~~ ⁽¹⁾	~~35%-100%~~
~~Oil price~~	~~three years NYMEX WTI forward curve~~
~~Natural gas price~~	~~three years NYMEX Henry Hub forward curve~~
~~NGL price~~	~~39% of oil price~~
~~Price escalation~~ ⁽²⁾	~~2.00~~	%
⁽¹⁾ ~~Possible reserves had a reserve risk factor of 35%, probable reserves had a reserve risk factor of 75%, and proved undeveloped reserves had a reserve risk factor of 90%.~~
⁽²⁾ ~~Prices were escalated at the end of the forward curve~~

~~The following table summarizes the purchase price and allocation of the fair values of assets acquired and liabilities assumed (in thousands):~~

Consideration given
Equity units $ 1,281,743
Allocation of purchase price
Inventory $ 205
Proved oil and natural gas properties 214,647
Unproved oil and natural gas properties 1,086,600
Total assets acquired 1,301,452
Asset retirement obligations (7,547 )
Revenue suspense (12,162 )
Total fair value of net assets acquired $ 1,281,743

The following unaudited pro forma combined results of operations is provided for the three and nine months ended September 30, 2017 as though the Linn Acquisition had been completed as of the earliest period presented at the time of the acquisition. The pro forma combined results of operations have been prepared by adjusting the historical results of the Company to include the historical results of the assets acquired in the Linn Acquisition.

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

These supplemental pro forma results of operations are provided for illustrative purposes only and do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future. The pro forma results of operations do not include any cost savings or other synergies that resulted, or may result, from the Linn Acquisition or any estimated costs incurred to integrate the Linn Acquisition.

Three Months Ended
September 30, 2017 Nine Months Ended
September 30, 2017
(in thousands)
Revenue $ 55,119
$ 156,593
Net income $ 17,052
$ 55,253

~~Acquisitions of Unproved Properties~~

During the year ended December 31, 2017, the Company acquired, from unrelated third parties, interests in approximately 23,400 net acres of leasehold in separately negotiated transactions for aggregate cash consideration of $49.7 million, all of which were accounted for as asset acquisitions and recorded as additions to unproved oil and natural gas properties.

~~As discussed in~~ ~~Note 12 –Transactions with Affiliates~~, Citizen and Linn acquired acreage during 2017 on behalf of Roan LLC for $63.0 million, which was included in accounts payable and accrued liabilities – affiliates at December 31, 2017. In March 2018, Roan LLC paid Linn $22.9 million in cash and issued equity units to both Citizen and Linn to settle the amount due.

Note 5 – Oil and Natural Gas Properties

The Company’s oil and natural gas properties are in the continental United States. The oil and natural gas properties include the following:


	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
	(in thousands)						(in thousands)
Oil and natural gas properties
Proved	$	1,276,950		$	750,492		$	1,991,687		$	1,538,379
Unproved	1,152,942			1,126,459			1,048,592			1,089,954
Less: accumulated depreciation, depletion, amortization and impairment	(183,557		)	(78,307		)	(400,710		)	(230,836		)
Oil and natural gas properties, net	$	2,246,335		$	1,798,644		$	2,639,569		$	2,397,497

The Company recorded depletion expense on capitalized oil and natural gas properties of $36.7 million and $10.7 million for the three months ended September 30, 2018 and 2017, respectively, and $82.4 million and $22.0 million for the nine months ended September 30, 2018 and 2017, respectively.

~~For the three and nine months ended September 30, 2018, the~~ Company recorded amortization expense on its unproved oil and natural gas properties of $13.7 million and $11.2 million for the three months ended September 30, 2019 and 2018, respectively, and $35.9 million and $25.6 million ~~respectively, which~~for the nine months ended September 30, 2019 and 2018, respectively. Unproved leasehold amortization expense is reflected in exploration expense on the accompanying condensed consolidated statements of ~~operations. There was no such expense recorded for the three~~operations and ~~nine months ended September 30, 2017. Unproved leasehold~~

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

~~amortization for the three and nine months ended September 30, 2018~~ reflects consideration of the Company’s drilling plans and the lease terms of its existing unproved properties. For the three and nine months ended September 30, 2017, the Company recorded impairment expense on its unproved oil and natural gas properties of $4.2 million and $4.5 million, respectively, for leases which expired. No impairment of proved oil and natural gas properties was recorded for the three and nine months ended September 30, 2019 or 2018.

Note 6 – Asset Retirement Obligations

The following is a reconciliation of the changes in the Company’s asset retirement obligation (“ARO”) for the nine months ended September 30, ~~2018~~2019 (in thousands):


Asset retirement obligation, December 31, 2017	$	10,769
Asset retirement obligation, December 31, 2018				$	16,848
Liabilities incurred or acquired	1,815			1,024
Revisions in estimated cash flows	318			—
Liabilities settled	(111		)	(80		)
Accretion expense	620			869
Asset retirement obligation, September 30, 2018	13,411
Asset retirement obligation, September 30, 2019				18,661
Less: current portion of obligations(1)	535			774
Asset retirement obligation – long term	$	12,876		$	17,887

~~Note 7 – Long-Term Debt~~(1) The current portion of the ARO liability is included in other current liabilities on the condensed consolidated balance sheet.

In September 2017, the Company entered into a $750.0 million credit agreement with an initial borrowing base of $200.0 million and maturity on September 5, 2022 (as amended, the “2017 Credit Facility”). In September 2018, the redetermination resulted in an increase to the borrowing base to $675.0 million. Redetermination of the borrowing base of the 2017 Credit Facility occurs semiannually on or about October 1 and April 1. As of September 30, 2018, the Company had $394.6 million of outstanding borrowings and no letters of credit outstanding under the 2017 Credit Facility. The 2017 Credit Facility is secured by substantially all of the assets of the Company.

The Company amended the 2017 Credit Facility in September 2018 to increase the borrowing base as noted above as well as to allow for permitted additional debt of up to $500 million before any reduction in the borrowing base would occur, to reduce the applicable margin for both London Interbank Offered Rate (“LIBOR”) and alternate base rate (“ABR”) loans by 0.25% for each utilization level, and to reduce the commitment fee rate for the two lowest utilization levels to 0.375%.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 7 – Long-Term Debt

Long-term debt consists of the following:



	September 30, 2019			December 31, 2018
	(in thousands)
Credit Facility	$	732,639		$	514,639

Term Loan	$	50,000		$	—
Unamortized original issue discount on Term Loan	(1,022		)	—
Repayment premium on Term Loan	97			—
Deferred financing costs on Term Loan	(3,480		)	—
Term Loan, net	$	45,595		$	—

Credit Facility

In September 2017, the Company entered into a $750.0 million credit agreement with a maturity date of September 5, 2022 (as amended, the “Credit Facility”). Redetermination of the borrowing base of the Credit Facility generally occurs semiannually on or about October 1 and April 1. In October 2019, the Company entered into an amendment to its Credit Facility to postpone the October 2019 redetermination to January 2020 as well as to limit the Company’s borrowings under the Credit Facility to the lesser of (i) $732.6 million, (ii) the borrowing base, (iii) the maximum aggregate amount (as defined in the credit agreement), or (iv) the total commitments (as defined in the agreement) until the January 2020 redetermination is effective.

As of September 30, 2019, the Company had $732.6 million of outstanding borrowings and no letters of credit outstanding under the Credit Facility. The Credit Facility is secured by substantially all of the assets of Roan LLC. As discussed below, the Company entered into a Term Loan in June 2019 and used a majority of the proceeds from the initial borrowing to pay down $45.0 million of outstanding borrowings under the Credit Facility.

The Company amended the Credit Facility in March 2019 to increase the borrowing base as well as to allow for (i) secured permitted additional debt of up to $250 million before any reduction in the borrowing base would occur and (ii) unsecured permitted additional debt of up to $400 million before any reduction in the borrowing base would occur.

Effective June 2019, the Credit Facility was amended to (i) reaffirm the borrowing base at $750.0 million, (ii) temporarily reduce the current ratio to 0.85 to 1.00 at June 30, 2019 and to 0.80 to 1.00 at September 30, 2019, (iii) increase the rates in the utilization grid for London Interbank Offered Rate (“LIBOR”) and alternate base rate (“ABR”) loans by 0.25% until the Company delivers a compliance certificate demonstrating a current ratio of not less than 1.00 to 1.00, (iv) increase the mortgage coverage requirements from 85% to 95%; and (v) restrict certain payments between Roan Inc. and Roan LLC in the event that Roan LLC transfers any of its oil and natural gas properties to Roan Inc.

Amounts borrowed under the ~~2017~~ Credit Facility bear interest at LIBOR or the ~~ABR.~~ABR at the Company’s election. The rate used for ABR loans is based on the higher of the prime rate, the federal funds effective rate plus 0.50% or the one-month LIBOR rate plus 1%. Either rate is adjusted upward by an applicable margin, based on the utilization percentage of the ~~2017~~ Credit Facility. Additionally, the ~~2017~~ Credit Facility provides for a commitment fee, which is payable at the end of each calendar quarter. The pricing grid below shows the applicable margin

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

for LIBOR ~~rate~~ or ABR loans as well as the commitment fee depending on the Utilization Level (as defined in the credit agreement): for the Company during the nine months ended September 30, 2019.


Utilization Level	Utilization	LIBOR Margin	Applicable Margin	Commitment Fee	Utilization	LIBOR Margin	ABR Margin	Commitment Fee
Level I	<25%	2.00%	1.00%	0.375%	<25%	2.00%	1.00%	0.375%
Level II	>25% but <50%	2.25%	1.25%	0.375%	>25% but <50%	2.25%	1.25%	0.375%
Level III	>50% but <75%	2.50%	1.50%	0.500%	>50% but <75%	2.50%	1.50%	0.500%
Level IV	>75% but <90%	2.75%	1.75%	0.500%	>75% but <90%	2.75%	1.75%	0.500%
Level V	>90%	3.00%	2.00%	0.500%	>90%	3.00%	2.00%	0.500%

Due to the Company’s current ratio at September 30, 2019 being less than 1.00 to 1.00, the LIBOR margin and ABR margin will increase by 0.25% from the amounts noted in the table above for the fourth quarter of 2019.

The ~~2017~~ Credit Facility contains representations, warranties, covenants, conditions and defaults customary for transactions of this type, including but not limited to: (i) limitations on liens and incurrence of debt covenants; (ii) limitations on the sale of property, mergers, consolidations and other similar transactions covenants; (iii) limitations on investments, loans and advances covenants; and (iv) limitations on dividends, distributions, redemptions and restricted payments covenants. Additionally, the Company is prohibited from hedging in excess of (a) 80% of reasonably anticipated projected production for the first thirty (30) month rolling period (based upon the Company’s internal projections) and (b) 80% of reasonably anticipated projected production from proved reserves for the second thirty (30) month rolling period of such sixty (60) month period (based on the most recently delivered reserve report). If the amount of borrowings outstanding exceed 50% of the borrowing base, the Company is required to hedge a minimum of 50% of the future production expected to be derived from proved developed reserves for the next eight quarters per its most recent reserve report.

The ~~2017~~ Credit Facility also contains financial covenants requiring the Company to comply with a leverage ratio of the Company’s consolidated debt to consolidated EBITDAX (as defined in the credit agreement) for the period of four fiscal quarters then ended of not more than 4.00 to 1.00 and a current ratio of the Company’s consolidated current assets to consolidated current liabilities (as defined in the credit agreement to exclude non-cash assets and liabilities under ASC Topic 815 Derivatives and Hedging and ASC Topic 410 Asset Retirement and Environmental Obligations) as of not less than 0.80 to 1.00 for the ~~fiscal~~ quarter ended ofSeptember 30, 2019 and not less than 1.00 to ~~1.00.~~1.00 for all quarters thereafter.

As of September 30, ~~2018,~~2019, the Company was in compliance with the covenants under the ~~2017~~Credit Facility and expects to remain in compliance for the next twelve months based on the current borrowing base. If the Company is not able to maintain compliance with the covenants under the Credit Facility in the future, it would be in default under the Credit Facility. A default, if not waived, could result in acceleration of the indebtedness outstanding under the Credit Facility and a default with respect to, and an acceleration of, the indebtedness outstanding under any other debt agreements, including the Term Loan.

Term Loan

In June 2019, Roan Inc. entered into a term loan facility (“Term Loan”) with initial commitments of $100.0 million and a potential incremental commitment of $50.0 million at the Company’s election. The lenders in the facility are funds affiliated with certain significant stockholders of Roan Inc. that are represented on the board of directors. The Term Loan matures in October 2020 and is secured by all of the assets of Roan Inc.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Borrowings under the Term Loan bear interest at the three-month LIBOR rate plus 7.5% or ABR rate plus 6.5%, as elected by the Company. The ABR rate is the highest of the prime rate, the federal funds effective rate plus 0.50% and the one-month LIBOR rate plus 1%. The Company can elect, subject to certain conditions included in the Term Loan agreement, to pay the interest on the Term Loan in kind. Interest is payable semi-annually for LIBOR loans and quarterly for ABR loans. The borrowings under the Term Loan are issued at a discount of 2.5%. Additionally, in conjunction with the initial Term Loan commitment and any future incremental commitments, the Company is required to issue shares to the lenders equal to approximately 1% of the outstanding Class A common stock at the time of the commitment.

As of September 30, 2019, the Company had borrowed $50.0 million and received proceeds of $47.8 million, which were net of the issuance discount and certain issuance fees. These proceeds were primarily used to pay down amounts outstanding under the Credit Facility. As of September 30, 2019, the outstanding borrowings under the Term Loan have an interest rate of 9.60%. The Company issued 1,525,395 shares of Class A common stock in June 2019 to the lenders of the Term Loan and received cash equal to the par value of the shares issued in return. The difference between the fair market value of the shares issued and the amount paid for such shares was considered a fee paid to the lenders and was included as deferred financing costs that will be amortized over the term of the Term Loan. The initial discount and all related financing costs are being amortized over the term of the Term Loan using the effective interest method.

Under the Term Loan, any repayment of outstanding borrowings incurs a premium equal to 1% plus any interest that would have accrued on the repaid amount if it had been outstanding for a year; provided, that such additional interest is only due in the event of prepayment before the maturity date. This premium associated with the initial borrowing, or $0.5 million, is being amortized over the term of the Term Loan.

In September 2019, the Company amended the Term Loan to permit the transfer of specified wellbore rights from Roan Inc. to Roan LLC. Additionally, the Company amended the Term Loan to specify that while the Merger Agreement, as defined in Note 15 – Subsequent Events, is effectiveno repayment premium would be due on any loans made after the amendment date and to specify that payment of interest in kind would not qualify as an additional loan under the Term Loan.

The Term Loan contains customary negative covenants including, but not limited to, restrictions on the Company’s ability to incur additional indebtedness or create certain liens on assets, restrictions on selling of assets and restrictions on investments, dividends and other specified transactions. These covenants are subject to a number of important exceptions and qualifications. The Term Loan also contains certain affirmative covenants which, among other things, require the Company to maintain $10.0 million of liquidity, defined in the agreement as unrestricted cash plus the available borrowings under the Credit Facility and require periodic financial and reserve reporting. In addition, the Term Loan agreement contains financial covenants consistent with those required by the Credit Facility.

~~Prior~~As of September 30, 2019, the Company was in compliance with the covenants under the Term Loan and expects to remain in compliance for the ~~2017~~next twelve months. If the Company is not able to maintain compliance with the covenants under the Term Loan in the future, it would be in default under the Term Loan. A default, if not waived, could result in acceleration of the indebtedness outstanding under the Term Loan and a default with respect to, and an acceleration of, the indebtedness outstanding under any other debt agreements, including the Credit Facility, Citizen had a two-year, $500.0 million credit facility (“Citizen 2017 Credit Facility”) with an initial borrowing base of $82.5 million. In August 2017, the Citizen 2017 Credit Facility was terminated and the outstanding balance of $20.3 million was repaid.Facility.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 8 – Derivative Instruments

The Company utilizes fixed price swaps and basis swaps to manage the price risk associated with the sale of its oil, ~~and~~ natural gas and NGL production. Fixed price swaps are settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. Basis swaps are settled monthly based on differences between a fixed price differential and the applicable market price differential, orthe Panhandle Eastern ~~Pipeline.~~Pipeline or Natural Gas Pipeline Company of America Mid Continent. When the referenced settlement price is less than the price specified in the contract, the Company receives an amount from the counterparty based on the price difference multiplied

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

by the volume. Similarly, when the referenced settlement price exceeds the price specified in the contract, the Company pays the counterparty an amount based on the price difference multiplied by the volume.

The following table reflects the Company’s open commodity contracts at September 30, ~~2018:~~2019:


	2018		2019		2020		Total		2019		2020		2021		Total
Oil fixed price swaps
Volume (Bbl)	1,233,180		5,540,670		1,599,500		8,373,350		1,200,730		3,429,500		1,730,000		6,360,230
Weighted-average price	$	57.09	$	59.86	$	63.14	$	60.08	$	60.75	$	60.57	$	56.08	$	59.38
Natural gas fixed price swaps
Volume (MMBtu)	8,004,000		29,200,000		12,325,000		49,529,000		11,040,000		19,665,000		7,250,000		37,955,000
Weighted-average price	$	2.94	$	2.86	$	2.63	$	2.81	$	2.90	$	2.63	$	2.65	$	2.71
Natural gas basis swaps
Volume (MMBtu)	4,600,000		21,900,000		3,640,000		30,140,000		7,360,000		10,980,000		—		18,340,000
Weighted-average price	$	0.54	$	0.58	$	0.62	$	0.58	$	0.52	$	0.49	$	—	$	0.50
Natural gas liquids fixed price swaps
Volume (Bbl)									460,000		1,281,000		730,000		2,471,000
Weighted-average price									$	28.66	$	23.22	$	21.90	$	23.84

The Company nets the fair value of derivative instruments by counterparty in the accompanying condensed consolidated balance sheets where the right to offset exists. See Note 9 – Fair Value Measurements for further information regarding the fair value measurement of the Company’s derivatives.

As the Company has elected to not account for commodity derivative instruments as hedging instruments, gains or losses resulting from the change in fair value along with the gains or losses resulting infrom settlement of derivative contracts are reflected in gain (loss) ~~gain~~ on derivative contracts included in the accompanying condensed consolidated ~~statement~~statements of operations.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table presents the Company’s gain (loss) ~~gain~~ on derivative contracts and net cash received (paid) ~~received~~ upon settlement of its derivative contracts for the three and nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:

Three Months Ended
September 30, Nine Months Ended
September 30,
2018 2017 2018 2017
(in thousands)
(Loss) gain on derivative contracts $ (36,704 ) $ 131
$ (100,920 ) $ 2,385
Net cash (paid) received upon settlement of derivative contracts $ (13,551 ) $ 2,255
$ (27,462 ) $ 2,385
Net cash received upon settlement of derivative contracts prior to contractual maturity $ —
2,255
$ 377
$ 2,255



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019			2018
	(in thousands)
Gain (loss) on derivative contracts	$	40,675	$	(36,704	)	$	(5,913	)	$	(100,920	)
Net cash received (paid) upon settlement of derivative contracts ⁽¹⁾	$	16,541	$	(13,551	)	$	29,284		$	(27,462	)

(1) Includes $0.4 million of cash received upon settlement of derivative contracts prior to their contractual maturity for the nine months ended September 30, 2018.

During 2018 and 2019, the Company modified certain existing derivative contracts to comply with hedging requirements under its Credit Facility. During the three and nine months ended September 30,2019, $5.2 million and $9.3 million, respectively, of net cash received upon settlement was related to such modified derivative contracts. The cash settlements for these derivatives are classified as cash flows from financing activities in the accompanying condensed consolidated statement of cash flows due to the other-than-insignificant financing element contained in the modified derivative contract. There were no settlements received or paid related to modified contracts during the three and nine months ended September 30,2018.

Note 9 – Fair Value Measurements

The Company measures and reports certain assets and liabilities on a fair value basis and has classified and disclosed its fair value measurements using the following levels of the fair value hierarchy:

Level 1— Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date.

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

Level 2— Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1 that are either directly or indirectly observable as of the reporting date.

Level 3— Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value.

Assets and liabilities that are measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, which may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The determination of the fair values, stated below, considers the market for the Company’s financial assets and liabilities, the associated credit risk and other factors. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

The Company recognizes transfers between fair value hierarchy levels as of the end of the reporting period in which the event or change in circumstances causing the transfer occurred. During the three and nine months ended September 30, 2019 and 2018, the Company did not have any transfers between Level 1, Level 2 or Level 3 fair value measurements.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The ~~Company's~~Company’s recurring fair value measurements are performed for its commodity derivatives. Please refer to Note 8 – Derivative Instruments for additional discussion.

Commodity Derivative Instruments

Commodity derivative contracts are stated at fair value in the accompanying condensed consolidated balance sheets. The Company adjusts the valuations from the valuation model for nonperformance risk and for counterparty risk. The fair values of the Company’s commodity derivative instruments are classified as Level 2 measurements as they are calculated using industry standard models using assumptions and inputs which are substantially observable in active markets throughout the full term of the instruments. These include market price curves, contract terms and prices, credit risk adjustments, implied market volatility and discount factors.

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

The following table presents the amounts and classifications of the Company’s derivative assets and liabilities as of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, as well as the potential effect of netting arrangements on contracts with the same counterparty (in thousands):


	September 30, 2018																September 30, 2019
	Level 1		Level 2			Level 3		Gross Fair Value			Netting			Carrying Value			Level 1		Level 2			Level 3		Gross Fair Value			Netting			Carrying Value
Assets
Current commodity derivatives	$	—	$	4,282		$	—	$	4,282		$	(4,079	)	$	203		$	—	$	48,521		$	—	$	48,521		$	(681	)	$	47,840
Noncurrent commodity derivatives	—		908			—		908			(908		)	—			—		19,189			—		19,189			(395		)	18,794
Total assets	$	—	$	5,190		$	—	$	5,190		$	(4,987	)	$	203		$	—	$	67,710		$	—	$	67,710		$	(1,076	)	$	66,634
Liabilities
Current commodity derivatives	$	—	$	(68,340	)	$	—	$	(68,340	)	$	4,079		$	(64,261	)	$	—	$	(681	)	$	—	$	(681	)	$	681		$	—
Noncurrent commodity derivatives	—		(19,809		)	—		(19,809		)	908			(18,901		)	—		(395		)	—		(395		)	395			—
Total liabilities	$	—	$	(88,149	)	$	—	$	(88,149	)	$	4,987		$	(83,162	)	$	—	$	(1,076	)	$	—	$	(1,076	)	$	1,076		$	—

	December 31, 2017
	Level 1		Level 2			Level 3		Gross Fair Value			Netting			Carrying Value			December 31, 2018
																	Level 1		Level 2			Level 3		Gross Fair Value			Netting			Carrying Value
Assets
Current commodity derivatives	$	—	$	2,856		$	—	$	2,856		$	(2,704	)	$	152		$	—	$	85,728		$	—	$	85,728		$	(3,548	)	$	82,180
Noncurrent commodity derivatives	—		2,182			—		2,182			(1,186		)	996			—		21,565			—		21,565			(927		)	20,638
Total assets	$	—	$	5,038		$	—	$	5,038		$	(3,890	)	$	1,148		$	—	$	107,293		$	—	$	107,293		$	(4,475	)	$	102,818
Liabilities
Current commodity derivatives	$	—	$	(11,983	)	$	—	$	(11,983	)	$	2,704		$	(9,279	)	$	—	$	(4,393	)	$	—	$	(4,393	)	$	3,548		$	(845	)
Noncurrent commodity derivatives	—		(2,557		)	—		(2,557		)	1,186			(1,371		)	—		(1,068		)	—		(1,068		)	927			(141		)
Total liabilities	$	—	$	(14,540	)	$	—	$	(14,540	)	$	3,890		$	(10,650	)	$	—	$	(5,461	)	$	—	$	(5,461	)	$	4,475		$	(986	)

Non-Recurring Fair Value Measurements

The Company’s non‑recurring fair value measurements include ~~the purchase price allocations for the fair value of assets and liabilities acquired through business combinations and~~ the determination of the grant date fair value of the Company’s performance share units. The fair value of assets and liabilities acquired through business combinations is calculated using a discounted‑cash flow approach using level 3 inputs. The fair value of assets or liabilities associated with purchase price allocations is on a non‑recurring basis and is not measured in periods after initial recognition. The grant date fair value of the Company’s performance share

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

units is determined using a Monte Carlo simulation model and is classified as a Level 3 measurement. Please refer to Note ~~4 – Acquisitions~~ ~~and~~ ~~Note~~ 11 – Equity Compensationfor additional discussion.

Other Financial Instruments

The Company’s financial instruments, not otherwise recorded at fair value, consist primarily of cash, trade receivables, trade payables, and long-term debt. The carrying values of cash and cash equivalents, accounts payable, revenue payable, and accounts receivable approximate fair values due to the short-term maturities

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

of these instruments and the carrying value of long-term debt approximates fair value as the applicable interest rates are variable and reflective of market rates.

Note 10 – Equity

In connection with the Term Loan commitment, the Company issued 1,525,395 shares of its Class A common stock to the lenders. See further discussion in Note 7 – Long-Term Debt. The lenders paid cash equal to the par value of the shares issued or $1,525. The difference between the fair market value of the shares and the amount paid was considered a fee paid to the lenders that will be amortized over the term of the Term Loan. The fair market value of the shares was calculated as the closing price of the Company’s Class A common stock on the day before the subscription agreement was executed.

When restricted stock units vest and are settled in the Company’s common stock, the Company makes the required statutory tax payments on behalf of the restricted stock unit holder and withholds from the vested award a number of shares of common stock with a value on the date of settlement equal to the tax obligation associated with such vested restricted stock units. In September 2019, the Company withheld 112,945 shares of Class A common stock for the payment of taxes due with an associated value of approximately $0.1 million. These shares were accounted for as treasury stock when withheld.

Earnings per Share

The Company uses the treasury stock method to determine the diluted weighted average shares. All performance share unit and restricted stock unit awards were deemed anti-dilutive for all periods presented in the accompanying condensed consolidated statements of operations and were therefore excluded from dilutive weighted average shares. See further discussion of the Company’s equity awards in Note 11 – Equity Compensation.

Reorganization

In September 2018 and in conjunction with the Reorganization, the Company issued 152.5 million shares of its Class A common stock to the members of Roan LLC in exchange for their equity interest in Roan LLC. The Reorganization was accounted for as a reverse recapitalization with Roan Inc. as the accounting acquirer and therefore did not result in any change in the accounting basis for the underlying assets. Net income before taxes and equity-based compensation were allocated ratably to the members of Roan LLC and the stockholders of Roan Inc. for the period before and after the Reorganization, respectively. For comparative purposes, the issuance of the shares to the members of Roan LLC at the time of the Reorganization was reflected on a retroactive basis with the units outstanding during each period presented.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Roan LLC Equity

For the period of September 1, 2017 through the date of the Reorganization, Roan LLC was governed by the Amended and Restated Limited Liability Company Agreement of Roan Resources LLC. In connection with the Contribution in August 2017, Roan LLC issued 1.5 billion membership units representing capital interests in Roan LLC (the ~~"LLC Units"~~“LLC Units”) for a 50% equity interest in Roan LLC, to Linn in exchange for the contribution of oil and natural gas properties. ~~See~~ ~~Note 4 – Acquisitions~~ ~~for additional discussion of the Linn Acquisition.~~ Additionally, Roan LLC issued 1.5 billion LLC Units, which represented a 50% equity interest, to Citizen in exchange for the contribution of oil and natural gas properties. The fair value of the LLC Units issued to Citizen was the same as that of the LLC Units issued to Linn.

~~As discussed in~~ ~~Note 4 – Acquisitions, Citizen and Linn acquired acreage during 2017 on Roan LLC’s behalf.~~ In March 2018, Roan LLC issued 19.2 million LLC Units to each Citizen and Linn to settle amounts due for the ~~additional~~ leasehold ~~acreage.~~acreage acquired on Roan LLC’s behalf during 2017.

For the period January 1, 2017 through August 31, 2017, Citizen’s operations were governed by the provisions of the Citizen Amended and Restated Operating Agreement (the “Citizen Operating Agreement”), effective February 29, 2016, and Citizen had two classes of membership interests outstanding, Class A and Class B. Class A represented capital interests in Citizen and Class B represented interests in profits, losses and distributions. Distributions were made to the Class A and Class B members pro rata in accordance with their membership interests; however, once the Class A members received an internal rate of return threshold of 9% prior to distributions to any other class of interest, the Class B members received a percentage of distributions in excess of their membership interests based on the terms of the Citizen Operating Agreement.

Note 11 – Equity Compensation

~~The~~In connection with the Reorganization, the Company ~~has~~ adopted the Roan Resources, Inc. Amended and Restated Management Incentive Plan (the “Plan”), which provides for grants of options, stock appreciation rights, restricted stock unit, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards.

Performance Share Units

Prior to the Reorganization, Roan LLC granted performance share units to certain of its employees under the Roan LLC Management Incentive Plan. The performance share units were converted into awards of performance share units under the Plan, hereafter referred to as the ~~“PSUs,~~“Roan LLC PSUs,” and are subject to the terms of the Plan and individual award agreements. The amount of Roan LLC PSUs that can be earned range from 0% to 200% based on the Company’s market value on December 31, 2020 (“Performance Period End Date”). The Company’s market value on the Performance Period End Date will be determined by reference to the volume-weighted average price of the Company’s Class A common stock for the 30 consecutive trading days immediately preceding the Performance Period End Date. Each earned Roan LLC PSU will be settled through the

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

issuance of one share of the Company’s Class A common stock. Other than the security in which the Roan LLC PSUs are settled, no terms of the Roan LLC PSUs were modified in connection with the conversion of the Roan LLC PSUs.

The following table ~~summarizes information related to~~presents activity for the ~~total number of~~Roan LLC PSUs ~~awarded as of~~during the nine months ended September 30, ~~2018:~~2019:

Number of
PSUs Weighted
Average Fair
Value Total Fair
Value ($ in thousands)
PSUs outstanding at December 31, 2017 16,350,000
$ 1.41
$ 23,054
PSUs granted 6,825,000
$ 1.88
$ 12,810
PSUs vested —
$ —
$ —
Conversion ⁽¹⁾
(22,016,250 ) $ —
$ —
PSUs outstanding at September 30, 2018 1,158,750
$ 30.95
$ 35,864



	Number of PSUs		Weighted Average Fair Value		Total Fair Value ($ in thousands)
Outstanding at December 31, 2018	1,158,750		$	30.95	$	35,864
Granted	—		—		—
Vested	—		—		—
Forfeited	(518,750	)	29.71		(15,411		)
Outstanding at September 30, 2019	640,000		$	31.96	$	20,453

⁽¹⁾

During the nine months ended September 30, 2019, the Company granted performance share units (“Roan Inc PSUs”) to certain of its employees under the Plan. The amount of Roan Inc PSUs ~~were converted~~that can be earned

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

range from 0% to 100% based on ~~a basis of 0.05 to 1.0. There was no change to~~ the ~~deemed fair value~~60-day volume weighted average price of the ~~awards based~~Company’s Class A common stock for any 60 consecutive trading days during the specified performance period beginning on ~~assessment~~the date of ~~modification.~~grant. There were no such grants during 2018.

The following table presents activity for the Roan Inc PSUs during the nine months ended September 30,2019:



	Number of PSUs		Weighted Average Fair Value		Total Fair Value ($ in thousands)
Outstanding at December 31, 2018	—		$	—	$	—
Granted	2,716,636		1.58		4,301
Vested	—		—		—
Forfeited	(190,735	)	2.55		(486		)
Outstanding at September 30, 2019	2,525,901		$	1.51	$	3,815

Compensation expense associated with the Roan LLC PSUs and Roan Inc PSUs for the three months ended September 30, 2019 and 2018 was $1.5 million and $2.9 million, respectively, and for the nine months ended September 30, 2019 and 2018 was ~~$2.9~~$0.8 million and $8.1 million, ~~respectively,~~respectively. During 2019, forfeitures of Roan LLC PSUs and Roan Inc PSUs resulted in the reversal of compensation expense of $6.5 million. Compensation expense is included in general and administrative expenses on the accompanying condensed consolidated statements of operations. Unrecognized expense as of September 30, ~~2018~~2019 for ~~all~~the outstanding ~~PSU awards~~Roan LLC PSUs and the outstanding Roan Inc PSUs was ~~$27.4~~$12.1 million, ~~and~~which will be recognized over a weighted-average remaining period of ~~2.25~~2.21 years. Under the treasury stock method, the PSUs are antidilutive for the weighted average share calculation and therefore are excluded from dilutive weighted average shares in the accompanying condensed consolidated statements of operations.

The grant date fair value of both the Roan LLC PSUs and the Roan Inc PSUs was determined using a Monte Carlo simulation model, which results in an estimated percentage of performance share units earned and estimated Company value onat the ~~Performance Period End Date.~~end of the performance period. The grant date fair value of the Roan LLC PSUs and the Roan Inc PSUs is expensed on a straight-line basis from the grant date to the ~~Performance Period End Date.~~end of the performance period.

The following assumptions were used for the Monte Carlo simulation model to determine the grant date fair value and associated compensation expense for the ~~PSUs~~Roan Inc PSU awards granted ~~during the following periods:~~in 2019:

Six Months Ended June 30, 2018 Three Months Ended September 30, 2018
Company enterprise value (in billions) $ 4.56
$ 4.19
Equity volatility 34.0 % 36.0 %
Weighted average risk-free interest rate 1.96 % 2.54 %



Equity volatility	65.00	%
Weighted average risk-free interest rate	2.25	%

Restricted Stock Units

Under the Plan, the Company is authorized to issue restricted stock units, hereafter referred to as the “RSUs,” to eligible employees and other service providers. The Company estimates the fair values of RSUs as of the closing price of the Company’s Class A common stock on the grant date of the award, which is expensed over the applicable vesting period.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

The following table presents activity for the Company’s RSUs during the nine months ended September 30,2019:



	Number of RSUs		Weighted Average Fair Value		Total Fair Value ($ in thousands)
Outstanding at December 31, 2018	11,800		$	16.95	$	200
Granted	1,676,325		3.86		6,476
Vested	(381,764	)	4.65		(1,775		)
Forfeited	(187,235	)	4.60		(861		)
Outstanding at September 30, 2019	1,119,126		$	3.61	$	4,040

Compensation expense associated with the RSUs for three and nine months ended September 30, 2019 was $1.5 million and $2.1 million, respectively, and is included in general and administrative expenses on the accompanying condensed consolidated statements of operations. There were no RSUs issued prior to the Reorganization in 2018. Unrecognized expense as of September 30, 2019 for all outstanding RSUs was $3.7 million, which will be recognized over a weighted-average remaining period of 1.61 years.

Note 12 –Transactions with Affiliates

Natural Gas Dedication Agreement

The Company has a gas dedication agreement with Blue Mountain Midstream LLC (“Blue Mountain”), a subsidiary of Riviera Resources, Inc. (“Riviera”), which has directors and shareholders in common with the Company. Amounts due from Blue Mountain at September 30, 2019 and December 31, 2018 are reflected as Accounts receivable – Affiliates in the accompanying condensed consolidated balance sheets and represent accrued revenue for the Company’s portion of the production sold to Blue Mountain. Sales to Blue Mountain are reflected as Natural gas sales – Affiliates and Natural gas liquids sales – Affiliates in the accompanying condensed consolidated statements of operations. See further discussion of this gas dedication agreement in Note 14 – Commitments and Contingencies.

Water Management Services Agreement

In January 2019, the Company entered into a water management services agreement with a subsidiary of Blue Mountain, Wildcat Water Gathering LLC (“Wildcat Water”). Under this agreement, Wildcat Water will provide water management services including pipeline gathering, disposal, treatment and redelivery of recycled water. The agreement provides for an acreage dedication for water management services through January 2029. Wildcat Water began providing services under this agreement in April 2019. During the three and nine months ended September 30, 2019, the Company incurred costs of $8.7 million and $17.2 million, respectively, related to these services as operator of the related wells. For the three months ended September 30, 2019, the Company’s portion of these costs totaled $7.4 million, of which $5.4 million was included in production expenses in the accompanying condensed consolidated statements of operations and $2.0 million was capitalized in oil and natural gas properties on the accompanying condensed consolidated balance sheets. For the nine months ended September 30, 2019, the Company’s portion of these costs totaled $13.8 million, of which $10.0 million was included in production expenses in the accompanying condensed consolidated statements of operations and $3.8 million was capitalized in oil and natural gas properties on the accompanying condensed consolidated balance sheets. The remainder of the costs are billed out to third-party interest owners for their share of such costs. Amounts payable and accrued under this agreement at

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2019 of $6.5 million are included in accounts payable and accrued liabilities - Affiliates on the accompanying condensed consolidated balance sheets.

Oil Gathering Agreement

In July 2019, the Company entered into an oil gathering agreement with a subsidiary of Blue Mountain, Wildcat Oil Gathering LLC (“Wildcat Oil”). This agreement provides for dedication of certain of the Company’s acreage for oil gathering services for a term of ten years. Wildcat Oil is expected to begin providing services under this agreement in the fourth quarter of 2019 or early 2020.

Corporate Office Lease

During 2018, the Company entered into a lease for office space in Oklahoma City, Oklahoma that is owned by a subsidiary of Riviera under a lease with an initial term of 5 years with an option to extend the lease for an additional 5 years at the end of the initial term. The Company paid $0.4 million and $1.1 million during the three and nine months ended September 30, 2019, respectively, under this lease. During the three and nine months ended September 30, 2018, the Company paid $0.2 million and $0.3 million, respectively. Total remaining payments under the lease are $6.7 million, excluding the Company’s portion of the operating expenses of the building.

Tax Matters Agreement

In conjunction with the Reorganization, the Company entered into a tax matters agreement (“TMA”) with Riviera. See Note 13 – Income Taxesfor further discussion of the TMA. As a result of the TMA and the refund of an overpayment of estimated federal taxes by Linn Energy, Inc. related to the Riviera business that was received by the Company in November 2018, the Company paid $7.6 million to Riviera during the nine months ended September 30,2019.

Term Loan

In June 2019, the Company entered into the Term Loan agreement with lenders affiliated with certain stockholders of the Company that are represented on the board of directors. See further discussion in Note 7 – Long-Term Debt. Interest expense related to the Term Loan agreement for the three and nine months ended September 30, 2019 was $2.3 million, including amortization of the discount of $0.3 million and deferred financing costs related to the Term Loan of $0.7 million and excluding any interest capitalized, and is included in interest expense - Affiliates on the accompanying condensed consolidated statements of operations. Accrued interest due on the Term Loan of $1.3 million at September 30, 2019 is included in accounts payable and accrued liabilities - Affiliates on the accompanying condensed consolidated balance sheets.

Management Service Agreements

Under the MSAs, Citizen and Linn provided certain services in respect to the oil and natural gas properties they contributed to ~~the Company.~~Roan LLC. Such services included serving as operator of the oil and natural gas properties contributed, land administration, marketing, information technology and accounting services. As a result of Citizen and Linn continuing to serve as operator of the contributed assets and contracting directly with vendors for goods and services for operations, Citizen and Linn collected amounts due from joint interest owners for their share of costs and billed Roan LLC for its share of costs. The services provided under the MSAs ended in April 2018 when Roan LLC took over as operator for the oil and natural gas properties

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~owners for their share~~contributed by Citizen and Linn. In conjunction with the conclusion of ~~costs and billed the Company for its share of costs. The services provided under~~ the MSAs ~~ended~~ in April 2018, ~~when~~Roan LLC assumed certain working capital accounts associated with the ~~Company took over as operator for the oil and natural gas~~ properties contributed byfrom Citizen and Linn.

~~For~~During the nine months ended September 30, 2018, ~~the Company~~Roan LLC incurred approximately $10.0 million infor charges related to the services provided under the MSAs, which ~~are~~were recorded in general and administrative expenses in the ~~accompanying~~ condensed consolidated statements of operations. ~~Since~~As the ~~MSA~~MSAs ended in April 2018, there were no such charges related to the ~~MSA~~MSAs in 2019 or the three months ended September 30, 2018.

Through April 2018, Citizen and Linn billed the Company for its share of operating costs in accordance with the MSAs. At December 31, 2017, the Company had $55.5 million and $46.5 million due to Linn and Citizen, respectively, included in accounts payable and accrued liabilities – affiliates in the accompanying condensed consolidated balance sheets. At December 31, 2017, the Company had $19.0 million due to Linn and Citizen for revenue suspense associated with the oil and natural gas properties contributed to the Company included in accounts payable and accrued liabilities – affiliates in the accompanying condensed consolidated balance sheets.

Acquisition of Acreage

As provided for in the Contribution Agreement, Citizen and Linn acquired additional acreage totaling $63.0 million as of December 31, 2017 within an area of mutual interest on behalf of the Company. ~~As of December 31, 2017, the additional acreage acquired totaled $63.0 million and the Company reflected the amount due to Citizen and Linn in accounts payable and accrued liabilities – affiliates.~~ See~~Note 4 – Acquisitions~~ ~~and~~ Note 10 – Equity for further discussion of the settlement of the payable due to Citizen and Linn related to the additional acquired acreage.

~~Natural Gas Dedication Agreement~~

The Company has a gas dedication agreement with Blue Mountain Midstream LLC (“Blue Mountain”), a subsidiary of Riviera Resources, Inc. (“Riviera”), which has directors and shareholders in common with the Company. Amounts due from Blue Mountain at September 30, 2018 and December 31, 2017 are reflected as accounts receivable – affiliates in the accompanying condensed consolidated balance sheets and represent accrued revenue for the Company’s portion of the production sold to Blue Mountain. Sales to Blue Mountain are reflected as natural gas sales – affiliates and NGL sales – affiliates in the accompanying condensed consolidated statements of operations. See further discussion of this gas dedication agreement in ~~Note 14 – Commitments and Contingencies~~.

~~Corporate Office Lease~~

During 2018, the Company entered into a lease for office space in Oklahoma City, Oklahoma that is owned by a subsidiary of Riviera under a lease with an initial term of 5 years. The Company paid $0.4 million during the nine months ended September 30, 2018 under this lease. Total remaining payments under the lease are $8.3 million.

~~Tax Matters Agreement~~

~~In conjunction with the Reorganization, the Company entered into a tax matters agreement (“TMA”) with Riviera. See~~ ~~Note 13 – Income Taxesfor further discussion of the TMA and the related payable to Riviera.~~

~~Roan Resources LLC~~
~~Notes to Financial Statements~~

Note 13 – Income Taxes

As discussed in Note 1 – Business and Organization, ~~the Company~~Roan Inc. was formed in September 2018 in connection with the Reorganization. ~~The Company’s~~Roan Inc.’s accounting predecessor, Roan LLC, was treated as a flow-through entity for income tax purposes. As a result, the net taxable income or loss of Roan LLC and any related tax credits, for ~~federal~~ income tax purposes, ~~were deemed~~flowed through to ~~pass to the~~its members. Accordingly, no tax provision was made in the historical financial statements of Roan LLC since the income tax was an obligation of ~~the~~its members.

~~A deferred tax liability was recorded as a result of the Reorganization based on the Company being taxable as~~ Roan Inc. is a corporation ~~under the Internal Revenue Code of 1986, as amended.~~ ~~The initial recording of the deferred tax liability recognized by the Company as a result of the Reorganization was reflected in~~and subject to U.S. federal and state income tax expense based on the deferred tax liability resulting from the change in tax status. Due to the nontaxable nature of the Reorganization, there were no adjustments to the tax basis or other tax attributes in the measurement of the deferred taxes except to the extent any gain was recognized by the other parties to the Reorganization.tax.

The Company records its quarterly tax provision based on an estimate of the annual effective tax rate expected to apply to continuing operations for the various jurisdictions in which it operates. The Company’s effective combined U.S. federal and state income tax rate for the three and nine months ended September 30, 2019 was 23.4% and 23.8%, respectively, based on estimated net income for the year. The Company’s effective tax rate for three and nine months ended September 30, 2019 approximates the Company’s estimated annual effective tax rate which includes the federal and state income tax. The tax effects of certain items, such as tax rate changes, significant unusual or infrequent items, and certain changes in the assessment of the realizability of deferred taxes, are recognized as discrete items in the period in which they occur and are excluded from the estimated annual effective tax rate.

The Company’s effective combined U.S. federal and state income tax rate for the nine months ended September 30, 2018 excluding discrete items was 25.5%. During the third quarter of 2018, the Company recognized income tax expense of $299.7 million, primarily representing ~~the initial recording of the deferred tax liability recognized by the Company as a result of the Reorganization.~~

In conjunction with the Reorganization, the Company entered into athe TMA with Riviera. The TMA, in part, provides for the indemnification of the Company and the entitlement of Riviera to refunds ~~by Riviera of~~related to certain taxes ~~related to~~of Linn Energy, Inc. prior to the spinoff of ~~assets~~Riviera from Linn Energy, Inc. to Riviera. As a result of the TMA and an estimated overpayment of federal taxes by Linn Energy, Inc., the Company has recorded a $7.7 million income tax receivable and a payable of $7.7 million to Riviera at September 30, 2018. The receivable is included in accounts receivable - other and the payable is included in accounts payable and accrued liabilities - affiliates in the accompanying condensed consolidated balance sheets.

~~The Company’s deferred tax liabilities as of September 30, 2018 include the following (in thousands):~~

Deferred income tax assets (liabilities):
Oil and natural gas properties $ (322,911 )
Derivative contracts 22,530
Other 719
Deferred tax liabilities, net $ (299,662 )

~~Roan Resources, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~

Note 14 – Commitments and Contingencies

Lease Commitments

As discussed in Note 3 - Lease Accounting, the Company leases certain office buildings, drilling rigs, and field equipment under cancelable and non-cancelable leases to support our operations.

The Company’s lease costs for the three and nine months ended September 30, 2019 included operating lease costs of $0.6 million and $1.6 million, respectively, and short-term lease costs of $9.7 million and $56.8 million, respectively. Short-term lease costs exclude leases with a contract term of one month or less. Included in short-term lease costs is $8.4 million and $53.1 million, respectively, of gross costs related to the Company’s

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

drilling rig leases. The Company’s portion of the drilling rig costs are capitalized to oil and natural gas properties and the remainder is billed out to third-party interest owners for their share of such costs. Payments made for operating leases included in lease liabilities for the three and nine months ended September 30, 2019 were $0.5 million and $1.2 million, respectively.

The Company’s condensed consolidated balance sheet as of September 30, 2019 included lease assets and liabilities as follows (in thousands):



Operating Leases
Operating lease right of use assets	$	5,312

Current operating lease liabilities	$	1,892
Noncurrent operating lease liabilities	4,444
Total operating lease liabilities	$	6,336

The weighted average remaining lease term for our operating leases is 3.5 years and the weighted average discount rate is 8.5%.

The Company’s operating lease liabilities as of September 30, 2019 with enforceable contract terms that are greater than one year mature as follows (in thousands):



2019	$	478
2020	1,986
2021	2,073
2022	2,163
2023	445
Thereafter	171
Total lease payments	7,316
Less imputed interest	(980		)
Total	$	6,336

The Company’s future lease payments under ASC 840 as of December 31, 2018 were not materially different than those presented above.

Litigation

InThe Company is party to lawsuits arising in the ordinary course of business, including, but not limited to, commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions. The Company cannot predict the outcome of any such lawsuits with certainty, but management does not currently believe that any pending or threatened legal matters will have a material adverse impact on the Company’s financial condition.

Due to the nature of its business, the Company ~~may at times be~~is, from time to time, involved in other routine litigation or subject to disputes or claims related to its business activities, including workers’ compensation claims and ~~legal actions. Management believes it is remote that~~employment related disputes. In the ~~impact~~opinion of ~~such matters~~management, none of these other pending litigation disputes or claims against the Company, if decided adversely, will have a material adverse effect on the Company’s financial ~~position,~~condition, cash flows or results of ~~operations or cash flows.~~operations.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Environmental Matters

The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. These laws, which are often changing, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. The Company has established procedures for the ongoing evaluation of its operations to identify potential environmental exposures and to comply with regulatory policies and procedures. At September 30, ~~2018,~~2019, the Company had no environmental matters requiring specific disclosure or requiring the recognition of a liability.

Natural Gas Dedication Agreements

The Company has dedicated its natural gas production from the oil and natural gas properties contributed by Citizen under an agreement with a third party. Under this dedication agreement, the Company is required to deliver its natural gas production from the contract area, as defined in the agreement, through November 2030. There is no specified volume or volume penalty in the agreement.

For the oil and natural gas properties contributed by Linn, the Company assumed Linn’s dedication agreement with Blue Mountain. The agreement with Blue Mountain requires the Company to deliver its natural gas production from the contract area, as defined in the agreement, through November 2030. There is no specified volume or volume penalty in the agreement.

Volume Commitment

Under an agreement with a third party, the Company has a requirement to deliver a minimum volume of natural gas from a specified area, as defined in the agreement. In the event that the Company is unable to meet this natural gas volume delivery commitment, it would incur deficiency fees on any undelivered volumes as of November 2021. ~~If the Company was unable to deliver any additional natural gas volumes, it would owe deficiency fees of $8.6 million as of September 30, 2018.~~ Based on ~~natural gas volumes delivered as of September 30, 2018, current production from producing wells and~~ expected production from currently producing wells ~~planned to be drilled~~ in the specified area, the Company ~~expects to meet~~anticipates that it may not deliver the required minimum volume ~~commitment.~~of natural gas by November 2021. As a result, the Company has accrued $1.0 million for its share of the estimated shortfall deficiency fees as of September 30, 2019. The accrued liability is included in other noncurrent liabilities in the accompanying condensed consolidated balance sheet. If the Company is unable to deliver any natural gas volumes subsequent to September 30, 2019 through November 2021, total shortfall deficiency fees of $6.4 million would be due at the end of the commitment period.

Note 15 – Subsequent Events

~~Subsequent to September 30, 2018,~~Merger Agreement

On October 1, 2019, the Company entered into ~~fixed price swaps~~the Merger Agreement by and among Citizen Operating, the Merger Sub, a wholly owned subsidiary of Citizen Operating, and the Company. The Merger Agreement provides for, ~~2,500 Bbls per day~~among other things, the merger of ~~NGL production at~~the Company into Merger Sub with the Company as the surviving entity and a ~~weighted average price~~wholly owned subsidiary of ~~$34.03~~Citizen Operating (the “Merger”). As consideration for the ~~period~~Merger, Citizen Operating will purchase all outstanding Class A common stock of ~~October 2018~~the Company, as described in the Merger Agreement, for cash consideration of $1.52 per share. This would exclude shares that are held in treasury by the Company or owned by its wholly owned subsidiaries, shares owned by Citizen Operating or any of its wholly owned subsidiaries and shares held by stockholders who do not vote in favor of or consent to ~~December 2019~~the adoption of the Merger Agreement and ~~for 20,000 Mcf per day~~who properly demand appraisal of such shares

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

and complied in all respects with all the provisions of the Delaware General Corporation Law concerning the right of holders of shares to require appraisal.

Conditions to Close and Covenants

The Merger Agreement includes specified closing conditions that must be met or waived. These conditions include, but are not limited to, (i) the stockholders of the Company voting in favor of adopting the Merger Agreement, (ii) the expiration or termination of applicable waiting periods under applicable antitrust laws, (iii) the absence of any law, order, judgment or injunction by any governmental entity restraining, prohibiting or rendering the consummation of the Merger illegal, (iv) the Test Indebtedness of the Company, as defined in the Merger Agreement, being less than or equal to $760.0 million and (v) certain other customary closing conditions. The Merger Agreement also includes customary representations, warranties and covenants of the Company, Citizen Operating and Merger Sub. These include a covenant by the Company to enter into additional natural gas ~~production at~~liquid, natural gas and oil hedging arrangements. See Commodity Contracts below for discussion of the additional derivative contracts entered into by the Company in October 2019.

Termination Fees

Either the Company or Citizen Operating may terminate the Merger Agreement if the Merger is not consummated by March 17, 2020. The Merger Agreement includes specifications regarding fees to be paid by either party should the agreement be terminated prior to March 17, 2020. The Company’s board of directors may terminate the Merger Agreement to enter into a ~~weighted average price~~superior proposal upon satisfaction of ~~$2.93~~certain conditions, as specified in the Merger Agreement, and upon payment of a termination fee of $25.0 million. If Citizen Operating terminates the Merger Agreement, under certain circumstances as specified in the Merger Agreement, Citizen Operating would be obligated to pay a termination fee of $35.0 million. The Merger Agreement also contains a provision that would require Citizen Operating to pay for the ~~period~~cost (subject to a cap of $15.0 million) to unwind certain hedging arrangements if the transaction is terminated due to Citizen Operating’s breach or failure to obtain financing and the $35.0 million termination fee is insufficient to cover the unwind costs.

Roan Resources, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Commodity Contracts

Per the covenants of the Merger Agreement, the Company was required to enter into additional commodity contracts. The following table presents the additional derivative contracts entered into in October 2019:



	2019		2020		2021		2022		2023		2024
Oil fixed price swaps
Volume (Bbl)	—		—		—		1,261,500		1,047,000		686,500
Weighted-average price	$	—	$	—	$	—	$	50.00	$	50.00	$	50.00
Natural gas fixed price swaps
Volume (MMBtu)	—		9,845,000		15,370,000		—		—		—
Weighted-average price	$	—	$	2.39	$	2.39	$	—	$	—	$	—
Natural gas basis swaps
Volume (MMBtu)	—		18,580,000		22,610,000		—		—		—
Weighted-average price	$	—	$	0.45	$	0.38	$	—	$	—	$	—
Natural gas liquids fixed price swaps
Volume (Bbl)	456,500		1,574,400		1,441,100		—		—		—
Weighted-average price	$	22.62	$	19.09	$	18.91	$	—	$	—	$	—

Credit Facility Amendment

In October 2019, the Company entered into an amendment to its Credit Facility to postpone the October 2019 redetermination to January ~~2019~~2020 as well as to ~~December 2019.~~limit the Company’s borrowings to the lesser of (i) $732.6 million (ii) the borrowing base, (iii) the maximum aggregate amount (as defined in the credit agreement), or (iv) the total commitments (as defined in the agreement) until the January 2020 redetermination is complete. See Note 7 – Long-Term Debtfor further discussion of the Credit Facility.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the financial condition and results of the Company should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report as well as our audited consolidated financial statements and notes included in our ~~Current~~Annual Report on Form ~~8-K filed September 24, 2018.~~10-K. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are subject to risk and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the development, production, gathering and sale of oil, natural gas and NGLs. Please refer to Part II, Item 1A. “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for additional information regarding these risks and uncertainties. In light of these risks and uncertainties, the forward-looking events discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

Roan Inc. was incorporated in September 2018 to serve as a holding company, and prior to the Reorganization, had no ~~previous~~ operations, assets or liabilities. The historical financial and operating information included in this Quarterly Report, (i) on and after September 24, 2018, is that of Roan Inc., and (ii) prior to September 24, 2018, is the information of Roan LLC, our accounting predecessor. The historical financial and operating information of Roan LLC presented here, (i) prior to August 31, 2017, the date of the completion of the Contribution is that of Citizen, the predecessor of Roan LLC for financial reporting purposes and (ii) on and after August 31, 2017, is that of Roan LLC. Therefore, the operating information of Citizen prior to August 31, 2017 does not include financial information relating to the oil and natural gas properties contributed by Linn.

Overview

We are an independent oil and natural gas company focused on the development of our assets throughout the eastern and southern Anadarko Basin. The Anadarko Basin, which spans from south-central Oklahoma to the northeast corner of the Texas panhandle, is one of the largest and most prolific onshore oil and natural gas basins in the United States, featuring multiple producing horizons and extensive well production history demonstrated over seven decades of development. We focus our development on formations where we believe we can apply our technical and operational expertise in order to increase production and cash flow to deliver compelling economic rates of return on a risk adjusted basis. Our ~~objective is to maximize shareholder value and corporate returns by generating steady production growth, strong pre-tax margins and significant cash flow.~~

Our primary developmental focus is on our Merge acreage position in Canadian, Grady and McClain counties in Central Oklahoma. We are one of the most active operators in Oklahoma, with eight rigs actively operating as of September 30, 2018, all of which are focused on drilling horizontal well laterals in the Merge and SCOOP plays. Our acreage position is concentrated in ~~what~~areas that we believe ~~are the~~demonstrate higher percentage production of oil and ~~liquids-rich fairways of~~NGLs within the Merge play and provides us development opportunities through multiple stacked prospective development horizons.

Outlook

In October 2019, we entered into a Merger Agreement with Citizen Operating. The Merger Agreement provides for the merger of the Company into a wholly owned subsidiary of Citizen Operating with the Company as the surviving entity and a wholly owned subsidiary of Citizen Operating. As consideration for the merger, Citizen Operating will purchase all outstanding Class A common stock of the Company for cash consideration of $1.52 per share. The merger is expected to close in the fourth quarter of 2019 or first quarter of 2020, subject to satisfaction of the closing conditions contained in the Merger Agreement as discussed in Note 15 – Subsequent Events to the accompanying condensed consolidated financial statements.

In connection with the announcement of the Merger Agreement and appointment of a new Chief Executive Officer (“CEO”), we have temporarily reduced our drilling and development activity and suspended all completion activity. This reduction in activity allows our new CEO time to assess our operations plan. We currently anticipate exiting 2019 with no rigs running and are evaluating various operational plans in the event that the Merger Agreement does not close.

How We Evaluate Our Operations

We use a variety of financial and operational metrics to assess the performance of our oil and natural gas operations, including:

actual and projected reserve and production levels;

realized prices on the sale of oil, natural gas and NGLs, including the effect of our commodity derivative contracts;

lease operating expenses; and

capital expenditures on our oil and natural gas properties.

Factors That Significantly Affect Comparability of Our Financial Condition and Results of Operations

Corporate Reorganization

On September 24, 2018, we completed the Reorganization, ~~where~~as a result of which Roan LLC, our accounting predecessor, became a wholly owned subsidiary of Roan Inc. Roan Inc. was incorporated to serve as a holding company and, prior to the Reorganization, had no previous operations, assets or liabilities. For more information on our Reorganization, please see Note 1 – Business and Organization.

The historical financial and operating information included in this Quarterly Report, (i) on and after September 24, 2018, is that of Roan Inc., and (ii) prior to September 24, 2018, is the information of Roan LLC, our accounting predecessor. The historical financial and operating information of Roan LLC presented here, (i) prior to August 31, 2017, the date of the completion of the Contribution is that of Citizen, the predecessor of Roan LLC for financial reporting purposes and (ii) on and after August 31, 2017, is that of Roan LLC. Therefore, the operating information of Citizen prior to August 31, 2017 does not include financial information relating

Public Company Expenses

Subsequent to the ~~oil~~Reorganization, we incur direct, incremental general and ~~natural gas properties contributed by Linn.~~administrative expenses as a result of being a publicly traded company, including but not limited to, costs associated with hiring new personnel, Sarbanes-Oxley compliance, implementation of compensation programs that are competitive with our public company peer group, costs associated with annual and quarterly reports and our other filings with the SEC, exchange listing fees, tax return preparation, independent auditor fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and independent director compensation. These direct, incremental general and administrative expenses are not included in our historical results of operations.

Income Taxes

As a result of the Reorganization, we became subject to federal and state tax. ~~Due to the change in tax status, we have recorded a tax provision for the initial recording of the deferred tax liability recognized as a result of the Reorganization.~~ Our accounting predecessor, Roan LLC, was treated as a flow-through entity for income tax purposes. As a result, the net taxable income or loss of Roan LLC and any related tax credits, for federal income tax purposes, ~~were deemed~~flowed through to ~~pass to the~~its members. Accordingly, no tax provision was made in the historical financial statements of Roan LLC since the income tax was an obligation of ~~the~~its members.

~~Impact of ASC Topic 606 Adoption~~

Revenue for the three and nine months ended September 30, 2018 reflects the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606 requires certain costs that were previously recorded as gathering, processing and transportation expenses to be accounted for as a deduction from revenue. We elected the modified retrospective method of transition. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard. For a discussion of the impact of the adoption of ASC 606 on the Company’s current period results as compared to the previous revenue recognition standards, see ~~Note 3 – Revenue from Contracts with Customers~~.

Financial and Operational Performance

Our financial and operational performance for the nine months ended September 30, ~~2018~~2019 included the following highlights:

Net loss ~~was~~of $11.5 million for the nine months ended September 30, 2019, as compared to net loss of $288.9 million for the nine months ended September 30, ~~2018, as compared to net income of $28.8 million for~~2018. The decrease in the ~~nine months ended September 30, 2017. The~~ net loss was primarily due to:

$~~100.9~~303.3 milliondecreasein income tax expense during the nine months ended September 30, 2019, primarily related to the income tax expense of $299.7 million in 2018 due to the recognition of a deferred tax liability upon becoming a taxable entity in conjunction with the Reorganization;

$95.0 million decrease in loss on derivative contracts during the nine months ended September 30, ~~2018~~2019 as a result of ~~increases~~decreases in natural gas prices and, to a lesser extent, oil prices during this period;

partially offset by:

$~~19.7~~23.7 million decrease in total oil, natural gas and NGL sales, primarily as a result of a decrease in realized prices partially offset by an increase in production volumes during the nine months ended September 30, 2019;

$8.9 million increase in production expenses, primarily related to an increase in production volumes for the nine months ended September 30, ~~2018;~~2019;

$~~25.7~~8.3 million increase in exploration expenses, primarily related to increased unproved leasehold amortization during the nine months ended September 30, ~~2018;~~2019; and

$~~61.5~~58.3 million increase in depreciation, depletion, amortization and accretion, primarily due to ~~increased~~an increase in production volumes and a higher depletion rate due to increases in capital ~~expenditures;~~

$18.2 million increase in general & administrative expenses, primarily due to fees paid to Citizen and Linn under MSAs, salaries and benefits to our employees and equity-based compensation expense during the nine months ended September 30, 2018; and

~~$299.7 million~~ ~~income tax expense during the~~ ~~nine months ended September 30, 2018~~ ~~as a result of recognizing a deferred tax liability upon becoming a taxable entity after the Reorganization.~~

expenditures.

~~Partially offset by:~~

~~$213.1 million increase in oil, natural gas and NGL sales, primarily as a result of an increase in total production volumes during the nine months ended September 30, 2018.~~

Average daily sales volumes were ~~40.1~~51.2 MBoe for the nine months ended September 30, ~~2018,~~2019, an increase of ~~208%~~27% compared to ~~13.0~~40.1 MBoe during ~~2017.~~the same period in 2018.

~~Drilled~~We drilled or participated in ~~165~~96 gross ~~(51~~(46 net) wells inwith first production during the first nine months of ~~2018.~~2019.

~~1,246 gross (502 net) producing wells online at September 30, 2018, including 584 gross (430 net) operated wells.~~

Our Class A common stock began trading on the New York Stock Exchange (“NYSE”) under the ticker symbol “ROAN” on November 9, 2018. Upon trading on the NYSE, our Class A common stock ceased trading on the OTCQB market.

Sources of Revenue

Our revenues are derived from the sale of our oil and natural gas production, including the sale of NGLs that are extracted from our natural gas during processing. Revenues from product sales are a function of the volumes produced, product quality, market prices, and gas Btu content. Under our major gas dedication agreements, we have the ability to elect ethane recovery or rejection on a monthly basis. An election of ethane recovery typically results in higher NGL volumes and lower realized NGL prices while ethane rejection typically results in lower NGL volumes and higher realized NGL prices. Our revenues from oil, natural gas and NGL sales do not include the effects of derivatives. ~~For the nine months ended September 30, 2018, our revenues, excluding loss on derivative contracts, were derived 63% from oil sales, 16% from natural gas sales and 21% from NGL sales.~~ Our revenues may vary significantly from period to period as a result of changes in volumes of production sold or changes in commodity prices. The following table presents the sources of our revenues, excluding the effects of our derivative contracts, for the periods presented:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues
Oil sales	76	%	62	%	69	%	63	%
Natural gas sales	12	%	15	%	16	%	16	%
Natural gas liquid sales	12	%	23	%	15	%	21	%

Realized Prices on the Sales of Oil, Natural Gas and NGL Volumes

Our results of operations are heavily influenced by commodity prices. Commodity prices may fluctuate widely in response to (i) relatively minor changes in the supply of and demand for oil, natural gas and NGLs, (ii) market uncertainty and (iii) a variety of additional factors that are beyond our control. From time to time, we enter into derivative arrangements for our oil and natural gas production to mitigate the impact of price volatility on our business. See Item 3. Quantitative and Qualitative Disclosures About Market Risk – Commodity Price Risk for further discussion of the risks related to commodity price exposure and our derivative contracts.

Pricing for certain of our natural gas contracts are based on Oklahoma indexes, including ONEOK Gas Transportation, ~~(“OGT”),~~ Natural Gas Pipeline Company of America Mid-Continent, ~~(“NGPL MC”),~~ Panhandle Eastern Pipeline ~~(“PEPL”)~~ and Southern Star Central Gas Pipeline ~~(“SSCGP”)~~ due to the proximity of those pipelines to our producing properties. These indexes fluctuate from Henry Hub pricing due to a variety of reasons including the distance to the retail market, availability and capacity of pipelines to move the product to distribution hubs, customer demand, and competition between suppliers.

Oil and natural gas prices have been subject to significant fluctuations during the past several years. The ~~average oil prices were higher while the average natural gas prices remained consistent during the three and nine months ended September 30, 2018 compared to the same periods in 2017. The~~ following table sets forth the average NYMEX oil and natural gas prices for the three and nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Average NYMEX prices
Oil (Bbl)	$	69.55	$	48.21	$	66.75	$	49.47	$	56.42	$	69.55	$	57.02	$	66.75
Natural gas (MMcf)	$	3.04	$	3.06	$	3.06	$	3.12	$	2.47	$	3.04	$	2.72	$	3.06

Results of Operations

Three Months Ended September 30, ~~2018~~2019 Compared to Three Months Ended September 30, ~~2017~~2018

The following table presents selected financial and operating information for the periods presented.

Three Months Ended
September 30,
2018 2017
Production Data
Oil (MBbls) 1,089
348
Natural gas (MMcf) 11,417
4,709
Natural gas liquids (MBbls) 1,286
405
Total volumes (MBoe) 4,278
1,538
Average daily total volumes (MBoe/d) 46.5
16.7
Average Prices - as reported ⁽¹⁾

Oil (per Bbl) $ 68.86
$ 47.99
Natural gas (per Mcf) $ 1.58
$ 2.73
Natural gas liquids (per Bbl) $ 21.08
$ 24.87
Total (per Boe) $ 28.09
$ 25.76
Average Prices - including impact of derivative contract settlements ⁽¹⁾⁽²⁾

Oil (per Bbl) $ 55.71
$ 47.99
Natural gas (per Mcf) $ 1.62
$ 2.73
Natural gas liquids (per Bbl) $ 21.08
$ 24.87
Total (per Boe) $ 24.83
$ 25.76
Average Prices - excluding gathering, transportation and processing costs ⁽³⁾

Oil (per Bbl) $ 68.93
$ 47.99
Natural gas (per Mcf) $ 1.90
$ 2.73
Natural gas liquids (per Bbl) $ 27.37
$ 24.87
Total (per Boe) $ 30.86
$ 25.76

~~(1)~~

Average prices for the three months ended September 30, 2018 reflects the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606 requires certain costs that were previously recorded as gathering, processing and transportation expenses to be accounted for as a deduction from revenue. We elected the modified retrospective method of transition. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard.


~~(2)~~	~~Excludes settlement of derivative contracts prior to their contractual maturity.~~


~~(3)~~	~~Excludes the effects of netting gathering, transportation and processing costs under ASC 606.~~



	Three Months Ended September 30,
	2019		2018
Production Data
Oil (MBbls)	1,291		1,089
Natural gas (MMcf)	13,820		11,417
Natural gas liquids (MBbls)	1,345		1,286
Total volumes (MBoe)	4,939		4,278
Average daily total volumes (MBoe/d)	53.7		46.5
Average Prices - as reported
Oil (per Bbl)	$	54.51	$	68.86
Natural gas (per Mcf)	$	0.81	$	1.58
Natural gas liquids (per Bbl)	$	8.05	$	21.08
Total (per Boe)	$	18.70	$	28.09
Average Prices - including impact of derivative contract settlements
Oil (per Bbl)	$	58.13	$	55.71
Natural gas (per Mcf)	$	1.36	$	1.62
Natural gas liquids (per Bbl)	$	11.17	$	21.08
Total (per Boe)	$	22.05	$	24.83
Average Prices - excluding gathering, transportation and processing costs
Oil (per Bbl)	$	54.57	$	68.93
Natural gas (per Mcf)	$	1.49	$	1.90
Natural gas liquids (per Bbl)	$	12.49	$	27.37
Total (per Boe)	$	21.84	$	30.86

Revenues

Our operating revenues includes revenues from the sale of oil, natural gas and NGLs and gain (loss) on ~~our~~ derivative contracts. The following table provides information on our operating revenues:


	Three Months Ended September 30,					Three Months Ended September 30,
	2018			2017		2019		2018
Revenues	(in thousands)					(in thousands)
Oil sales ⁽¹⁾	$	74,987		$	16,701	$	70,371	$	74,987
Natural gas sales ⁽¹⁾	18,059			12,845		11,184		18,059
Natural gas liquid sales ⁽¹⁾	27,106			10,074		10,825		27,106
(Loss) gain on derivative contracts	(36,704		)	131
Gain (loss) on derivative contracts						40,675		(36,704		)
Total revenues	$	83,448		$	39,751	$	133,055	$	83,448

~~(1)~~

Revenue for the three months ended September 30, 2018 reflects the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606 requires certain costs that were previously recorded as gathering, processing and transportation expenses to be accounted for as a deduction from revenue. We elected the modified retrospective method of transition. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard.

Oil sales. Our oil sales ~~increased~~decreased by approximately ~~$58.3~~$4.6 million, or ~~349%~~6%, to $70.4 million for the three months ended September 30, 2019 from $75.0 million for the three months ended September 30, ~~2018 from $16.7 million for the three months ended September 30, 2017.~~2018. This ~~increase~~decrease was ~~primarily~~ due to the ~~increase~~decrease in ~~production as well as~~ the ~~increase in~~ average sales prices received for ~~those~~ produced volumes. ~~Our oil production increased 741 MBbls, or 213%, to 1,089 MBbls for the three months ended September 30, 2018 from 348 MBbls for the three months ended September 30, 2017.~~ The increase in production volumes was due to production associated with oil and natural gas properties contributed by Linn in August 2017 and drilling activity in the fourth quarter of 2017 and during 2018. The increasedecrease in average sales prices received on our oil production for the three months ended September 30, ~~2018~~2019 reflects the ~~increase~~decrease of approximately 19% in the index price for oil in the ~~2018~~2019 period as compared to the ~~2017~~2018 period. The decrease in oil sales from lower sales prices was partially offset by the increase in volumes produced. Our oil production increased during the three months ended September 30, 2019 by 202 MBbls, or 19%, to 1,291 MBbls for the three months ended September 30, 2019 from 1,089 MBbls for the three months ended September 30, 2018. This increase resulted from the new wells brought on line during the last quarter of 2018 and the first nine months of 2019.

Natural Gas sales. Our natural gas sales ~~increased~~decreased by approximately ~~$5.2~~$6.9 million, or ~~41%~~38%, to $11.2 million for the three months ended September 30, 2019 from $18.1 million for the three months ended September 30, ~~2018 from $12.8 million for the three months ended September 30, 2017.~~2018. This ~~increase~~decrease was primarily due to the ~~increase~~decrease in ~~production partially offset by~~ the ~~decrease in~~ average sales prices received for ~~those~~ produced volumes and the impact of netting transportation costs with revenue as a result of adopting ASC 606. Our natural gas production increased 6,708 MMcf, or 142%, to 11,417 MMcf for the three months ended September 30, 2018 from 4,709 MMcf for the three months ended September 30, 2017. The increase in production volumes was due to production associated with oil and natural gas properties contributed by Linn in August 2017 and drilling activity in the fourth quarter of 2017 and during 2018.volumes. The decrease in average sales prices received on our natural gas production for the three months ended September 30, ~~2018~~2019 reflects the decrease of approximately 19% in the ~~Oklahoma~~ index ~~prices we received under our contract terms~~price for natural gas in the ~~2018~~2019 period as compared to the ~~2017~~2018 period. The decrease in natural gas sales from lower sales prices was partially offset by an increase in production. Our natural gas production increased 2,403 MMcf, or 21%, to 13,820 MMcf for the three months ended September 30, 2019 from 11,417 MMcf for the three months ended September 30, 2018. This increase resulted from the new wells brought on line during the last quarter of 2018 and the first nine months of 2019.

NGL sales. Our NGL sales ~~increased~~decreased by approximately ~~$17.0~~$16.3 million, or ~~169%~~60%, to $10.8 million for the three months ended September 30, 2019 from $27.1 million for the three months ended September 30, ~~2018 from $10.1 million~~2018. This decrease was primarily due to the decrease in the average sales prices received for produced volumes partially offset by an increase in production. The decrease in average sales prices received on our NGL production for the three months ended September 30, ~~2017. This increase was primarily due~~2019 reflects the weakening of market pricing for NGL products in the 2019 period as compared to the increase in production and an increase in the average sales prices received for those produced volumes, partially offset by the impact of netting of transportation costs with revenue as a result of adopting ASC 606.2018 period. Our NGL production increased ~~881~~59 MBbls, or ~~218%~~5%, to 1,345 MBbls for the three months ended September 30, 2019 from 1,286 MBbls for the three months ended September 30, 2018. This increase resulted from the new wells brought on line during the last quarter of 2018 ~~from 405 MBbls for~~and the ~~three~~first nine months ~~ended September 30, 2017.~~of 2019.

The increase in production volumes was due to production associated with oil and natural gas properties contributed by Linn in August 2017 and drilling activity in the fourth quarter of 2017 and during 2018.

~~(Loss) gain~~Gain (loss) on derivative contracts. For the three months ended September 30, ~~2018, changes in oil prices~~2019, we had a ~~negative impact~~gain on ~~the fair value and settlement~~derivative contracts of ~~our derivative contracts. We had~~$40.7 million compared with a loss on derivative contracts of $36.7 million ~~including loss~~for the three months ended September 30, 2018. For the three months ended September 30, 2019, our gain on derivative contracts included a favorable change in the fair value of derivative contracts of $24.2 million and a gain on settlement of derivatives contracts of ~~$13.6 million and~~$16.5 million. For the three months ended September 30, 2018, our loss on derivative contracts included an unfavorable change in the fair value of derivative contracts of $23.1 million and a loss on settlement of derivative contracts of $13.6 million. ~~For~~The change in the fair value of derivative contracts from the three months ended September 30, ~~2017,~~2018 to the same period in 2019 was related to changes in the future price outlook for oil and natural gas prices that had a positive impact on the fair value of our derivative contracts. Additionally, we had ~~a gain on~~settlements received during the three months ended September 30, 2019 for derivative contracts ~~of $0.1 million related~~on all commodities due to ~~the settlement of~~favorable pricing compared to payments made during 2018 for oil derivative contracts ~~prior~~due to ~~their contractual maturity.~~unfavorable pricing.

Operating Expenses

Our operating expenses reflect costs incurred in the development, production and sale of oil, natural gas and NGLs. The following table provides information on our operating expenses:


	Three Months Ended September 30,					Three Months Ended September 30,
	2018		2017			2019			2018
	(in thousands, except costs per Boe)					(in thousands, except costs per Boe)
Operating Expenses
Production expenses	$	14,737	$	4,336		$	12,870		$	14,737
Gathering, transportation and processing ⁽¹⁾	—		4,890
Production taxes	6,210		847			4,839			6,210
Exploration expenses	11,646		4,229			14,578			11,646
Depreciation, depletion, amortization and accretion	37,164		10,824			55,504			37,164
General and administrative ⁽²⁾	13,177		4,489
Gain on sale of oil and natural gas properties	—		(838		)
General and administrative ⁽¹⁾						8,752			13,177
Gain on sale of other assets						(31		)	—
Total	$	82,934	$	28,777		$	96,512		$	82,934
Average Costs per Boe
Production expenses	$	3.44	$	2.82		$	2.61		$	3.44
Gathering, transportation and processing ⁽¹⁾	—		3.18
Production taxes	1.45		0.55			0.98			1.45
Exploration expenses	2.72		2.75			2.95			2.72
Depreciation, depletion, amortization and accretion	8.69		7.04			11.24			8.69
General and administrative ⁽²⁾	3.08		2.92
Gain on sale of oil and natural gas properties	—		(0.54		)
General and administrative ⁽¹⁾						1.77			3.08
Gain on sale of other assets						(0.01		)	—
Total	$	19.38	$	18.72		$	19.54		$	19.38

(1)

Gathering, transportation and processing for the three months ended September 30, 2018 reflects the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606 requires certain costs that were previously recorded as gathering, processing and transportation expenses to be accounted for as a deduction from revenue. We elected the modified retrospective method of transition. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard.

~~(2)~~

General and administrative expenses for the three months ended September 30, 2019 and 2018 include $3.0 million, or $0.61 per Boe, and $2.9 million, or $0.69 per Boe, of equity-based compensation ~~expense.~~expense, respectively. General and administrative expenses for the three months ended September 30, 2019 includes $(1.2) million, or $(0.25) per Boe, of reversal of bad debt expense due to a change in the allowance for doubtful accounts.

Production expenses. Production expenses are the operating costs incurred to maintain production. Such costs include the cost of saltwater disposal, monitoring, pumping, chemicals, maintenance, repairs, workover expenses and direct labor and overhead related to production activities. Production expenses were $12.9 million, or $2.61 per Boe, for the three months ended September 30, 2019, which was a decrease of $1.9 million, or 13%, from $14.7 million, or $3.44 per Boe, for the three months ended September 30, ~~2018, which was an increase of $10.4 million, or 240%, from $4.3 million for the three months ended September 30, 2017.~~2018. The ~~increase~~decrease in production expenses during ~~2018~~2019 compared to ~~2017~~2018 was primarily due to ~~increased production. The increase~~decreases in ~~production expenses per Boe was primarily driven by increases in maintenance and~~ surface repairs incurred as well as decreases in water hauling and disposal costs as a result of favorable pricing under our current water hauling contracts during the three months ended September 30, ~~2018.~~2019. These decreases were partially offset by an increase in variable costs related to an increase in total production of 15%.

~~Gathering, transportation and processing.~~ These costs are incurred to get oil, natural gas and NGLs to market. Gathering, transportation, and processing costs were $4.9 million, or $3.18 per Boe, for the three months ended September 30, 2017. As a result of adopting ASC 606 in January 2018, these costs are reflected as a deduction from revenue for the three months ended September 30, 2018.

Production taxes. Production taxes are paid on produced oil, natural gas, and NGLs based primarily on a percentage of sales revenues from production sold at fixed rates established by federal, state or local taxing authorities. Production taxes were $4.8 million for the three months ended September 30, 2019, a decrease of $1.4 million, or 22%, from $6.2 million for the three months ended September 30, ~~2018, an increase of $5.4 million, or 633%, from $0.8 million for the three months ended September 30, 2017.~~2018. Production taxes primarily ~~increased~~decreased due to ~~increased revenues and increased production tax rates, which became effective in July 2018.~~decreased revenue for the 2019 period.

Exploration expenses. These are primarily geological and geophysical costs that include seismic survey costs, amortization of the costs of unproved properties assessed for impairment on a group basis, costs of carrying and retaining unproved properties, and costs related to unsuccessful leasing efforts. Exploration expenses were $14.6 million for the three months ended September 30, 2019, an increase of $2.9 million, or 25%, from $11.6 million for the three months ended September 30, 2018. Exploration expenses for the three months ended September 30, 2019 included unproved leasehold amortization of $13.7 million and geological and geophysical expenses of $0.9 million. For the three months ended September 30, 2018, exploration expenses ~~of $11.6 million primarily consisted of~~included unproved leasehold ~~amortization.~~amortization of $11.2 million and geological and geophysical expenses of $0.5 million. Unproved leasehold amortization is calculated by considering our drilling plans and the lease terms of our existing unproved properties. ~~For the three months ended September 30, 2017, exploration expenses of $4.2 million consisted of impairment expense recognized related to our unproved properties.~~ The increase in ~~exploration expenses is due, in part, to amortization of~~ unproved leasehold ~~associated with~~amortization for the ~~oil and natural gas properties contributed by Linn.~~2019 period is primarily due to additional leasehold set to expire in upcoming periods.

Depreciation, depletion, amortization and accretion. Depreciation, depletion, amortization and accretion was $55.5 million, or $11.24 per Boe, for the three months ended September 30, 2019, compared to $37.2 million, or $8.69 per Boe, for the three months ended September 30, 2018, ~~compared to $10.8 million, or $7.04 per Boe, for the three months ended September 30, 2017,~~ which is an increase of ~~$26.3~~$18.3 million or ~~243%~~49%. The increase in depreciation, depletion, amortization and accretion was primarily due to an increase in the depletion rate for our oil and natural gas properties and, to a lesser extent, increased production. The per Boe increase in the depletion rate is attributable to capital expenditures during the period.

General and administrative. General and administrative expenses were $8.8 million, or $1.77 per Boe, for the three months ended September 30, 2019, a decrease of $4.4 million or 34% from $13.2 million, or $3.08 per Boe, for the three months ended September 30, 2018, an increase of $8.7 million or 194% from $4.5 million, or $2.92 per Boe, for the three months ended September 30, 2017. During the three months ended September 30, 2018, general and administrative expenses included2018. This decrease is primarily due to lower salaries and benefits ~~of $6.9 million and equity-based compensation expense of $2.9 million. There were no such expenses incurred~~ in the ~~three months ended September 30, 2017. These expenses were~~2019 period based on fewer employees and the elimination of our bonus accrual as well as a reversal of a portion of the allowance for doubtful accounts of $1.2 million, partially offset by ~~fees paid to Citizen~~increases in legal and ~~Linn under the MSAs of $2.5 million during the three months ended September 30, 2017. The MSAs with Citizen and Linn concluded~~other professional services in ~~April 2018.~~2019.

Other Expenses

Interest expense, net. Interest expense, net of capitalized interest, for the three months ended September 30, ~~2018~~2019 was ~~$2.1~~$11.4 million as compared to ~~$0.3~~$2.1 million for the three months ended September 30, ~~2017.~~2018. This increase was due to increased borrowings outstanding, including those under the Term Loan, during the three months ended September 30, ~~2018~~2019 as compared to the three months ended September 30, ~~2017.~~2018.

Income tax expense. ~~Income~~The income tax expense for the three months ended September 30, ~~2018~~2019 was ~~$299.7~~$5.9 million and is the result of our effective tax rate applied to net income for the quarter. Income tax expense for the three months ended September 30, 2018 was $299.7 million and relates to the recognition of a deferred tax liability upon becoming a taxable entity in conjunction with the Reorganization.

Nine Months Ended September 30, ~~2018~~2019 Compared to Nine Months Ended September 30, ~~2017~~2018

The following table presents selected financial and operating information for the periods presented.

Nine Months Ended
September 30,
2018 2017
Production Data
Oil (MBbls) 3,004
884
Natural gas (MMcf) 29,486
10,523
Natural gas liquids (MBbls) 3,042
911
Total volumes (MBoe) 10,960
3,549
Average daily total volumes (MBoe/d) 40.1
13.0
Average Prices - as reported ⁽¹⁾

Oil (per Bbl) $ 65.70
$ 51.70
Natural gas (per Mcf) $ 1.66
$ 2.93
Natural gas liquids (per Bbl) $ 21.49
$ 24.20
Total (per Boe) $ 28.44
$ 27.79
Average Prices - including impact of derivative contract settlements ⁽¹⁾⁽²⁾

Oil (per Bbl) $ 55.70
$ 51.70
Natural gas (per Mcf) $ 1.73
$ 2.95
Natural gas liquids (per Bbl) $ 21.49
$ 24.20
Total (per Boe) $ 25.90
$ 27.83
Average Prices - excluding gathering, transportation and processing costs ⁽³⁾

Oil (per Bbl) $ 65.72
$ 51.70
Natural gas (per Mcf) $ 2.07
$ 2.93
Natural gas liquids (per Bbl) $ 27.53
$ 24.20
Total (per Boe) $ 31.21
$ 27.79

~~(1)~~

Average prices for the nine months ended September 30, 2018 reflects the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606 requires certain costs that were previously recorded as gathering, processing and transportation expenses to be accounted for as a deduction from revenue. We elected the modified retrospective method of transition. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard.


~~(2)~~	~~Excludes settlement of derivative contracts prior to their contractual maturity.~~


~~(3)~~	~~Excludes the effects of netting gathering, transportation and processing costs under ASC 606.~~



	Nine Months Ended September 30,
	2019		2018
Production Data
Oil (MBbls)	3,628		3,004
Natural gas (MMcf)	37,973		29,486
Natural gas liquids (MBbls)	4,013		3,042
Total volumes (MBoe)	13,970		10,960
Average daily total volumes (MBoe/d)	51.2		40.1
Average Prices - as reported
Oil (per Bbl)	$	55.16	$	65.70
Natural gas (per Mcf)	$	1.21	$	1.66
Natural gas liquids (per Bbl)	$	10.43	$	21.49
Total (per Boe)	$	20.62	$	28.44
Average Prices - including impact of derivative contract settlements
Oil (per Bbl)	$	58.56	$	55.70
Natural gas (per Mcf)	$	1.40	$	1.73
Natural gas liquids (per Bbl)	$	12.85	$	21.49
Total (per Boe)	$	22.71	$	25.90
Average Prices - excluding gathering, transportation and processing costs
Oil (per Bbl)	$	55.29	$	65.72
Natural gas (per Mcf)	$	1.91	$	2.07
Natural gas liquids (per Bbl)	$	14.78	$	27.53
Total (per Boe)	$	23.80	$	31.21

Revenues

Our operating revenues includes revenues from the sale of oil, natural gas and NGLs and loss on derivative contracts. The following table provides information on our operating revenues:

Nine Months Ended
September 30,
2018 2017
(in thousands)
Revenues
Oil sales ⁽¹⁾
$ 197,356
$ 45,702
Natural gas sales ⁽¹⁾
48,956
30,884
Natural gas liquid sales ⁽¹⁾
65,377
22,049
(Loss) gain on derivative contracts (100,920 ) 2,385
Total revenues $ 210,769
$ 101,020



	Nine Months Ended September 30,
	2019			2018
Revenues	(in thousands)
Oil sales	$	200,138		$	197,356
Natural gas sales	46,054			48,956
Natural gas liquid sales	41,847			65,377
Loss on derivative contracts	(5,913		)	(100,920		)
Total revenues	$	282,126		$	210,769

~~(1)~~

Revenue for the nine months ended September 30, 2018 reflects the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606 requires certain costs that were previously recorded as gathering, processing and transportation expenses to be accounted for as a deduction from revenue. We elected the modified retrospective method of transition. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard.

Oil ~~Sales.~~sales. Our oil sales increased by approximately ~~$151.7~~$2.8 million, or ~~332%~~1%, to $200.1 million for the nine months ended September 30, 2019 from $197.4 million for the nine months ended September 30, ~~2018 from $45.7 million for the nine months ended September 30, 2017.~~2018. This increase

was primarily due to the increase in ~~production as well as the increase in average sales prices received for our produced volumes. Our oil production increased 2,120 MBbls, or 240%, to 3,004 MBbls for~~volumes during the nine months ended September 30, 2019 of 624 MBbls, or 21%, which resulted from wells brought on line during the last quarter of 2018 ~~from 884 MBbls for~~and the first nine months ~~ended September 30, 2017.~~of 2019. The increase in ~~production~~oil sales from higher volumes was ~~due to production associated with oil and natural gas properties contributed~~partially offset by ~~Linn in August 2017 and drilling activity~~the decrease in the ~~fourth quarter of 2017 and during 2018.~~average sales prices received for produced volumes. The ~~increase~~decrease in average sales prices received on our oil production for the nine months ended September 30, ~~2018~~2019 reflects the ~~increase~~decrease of approximately 15% in the index price for oil in the ~~2018~~2019 period as compared to the ~~2017~~2018 period.

Natural Gas ~~Sales.~~sales. Our natural gas sales ~~increased~~decreased by approximately ~~$18.1~~$2.9 million, or ~~59%~~6%, to $46.1 million for the nine months ended September 30, 2019 from $49.0 million for the nine months ended September 30, ~~2018 from $30.9 million for the nine months ended September 30, 2017.~~2018. This ~~increase~~decrease was primarily due to the ~~increase~~decrease in ~~production, partially offset by a decrease in~~the average sales prices received for ~~those~~ produced volumes and the impact of netting transportation costs with revenue as a result of adopting ASC 606. Our natural gas production increased 18,963 MMcf, or 180%, to 29,486 MMcf for the nine months ended September 30, 2018 from 10,523 MMcf for the nine months ended September 30, 2017. The increase in production volumes was due to production associated with oil and natural gas properties contributed by Linn in August 2017 and drilling activity in the fourth quarter of 2017 and during 2018.volumes. The decrease in average sales prices received on our natural gas production for the nine months ended September 30, ~~2018~~2019 reflects the decrease of approximately 11% in the ~~Oklahoma~~ index ~~prices we received under our contract terms~~price for natural gas in the ~~2018~~2019 period as compared to the ~~2017~~2018 period. The decrease in the average sales prices received for produced volumes was partially offset by an increase in production. Our natural gas production increased 8,487 MMcf, or 29%, to 37,973 MMcf for the nine months ended September 30, 2019 from 29,486 MMcf for the nine months ended September 30, 2018. This increase resulted from the new wells brought on line during the last quarter of 2018 and the first nine months of 2019.

NGL ~~Sales.~~sales. Our NGL sales ~~increased~~decreased by approximately ~~$43.3~~$23.5 million, or ~~197%~~36%, to $41.8 million for the nine months ended September 30, 2019 from $65.4 million for the nine months ended September 30, ~~2018 from $22.0 million~~2018. This decrease was primarily due to the decrease in the average sales prices received for produced volumes partially offset by an increase in production. The decrease in average sales prices received on our NGL production for the nine months ended September 30, ~~2017. This increase was primarily due~~2019 reflects the weakening of market pricing for NGL products in the 2019 period as compared to the increase in production and an increase in the average sales prices received for those produced volumes, partially offset by the impact of netting transportation costs with revenue as a result of adopting ASC 606.2018 period. Our NGL production increased ~~2,131~~971 MBbls, or ~~234%~~32%, to 4,013 MBbls for the nine months ended September 30, 2019 from 3,042 MBbls for the nine months ended September 30, 2018. This increase resulted from the new wells brought on line during the last quarter of 2018 ~~from 911 MBbls~~and the first nine months ~~ended September~~of 2019.

30, 2017. The increase in production volumes was due to production associated with oil and natural gas properties contributed by Linn in August 2017 and drilling activity in the fourth quarter of 2017 and during 2018.

~~(Loss) gain~~Loss on derivative contracts. For the nine months ended September 30, ~~2018, changes in oil prices had a negative impact on the fair value and settlement of our derivative contracts. We~~2019, we had a loss on derivative contracts of $5.9 million compared to $100.9 million ~~including~~for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, our loss on derivative contracts included an unfavorable change in the fair value of derivative contracts of $35.2 million, partially offset by a gain on settlement of derivatives contracts of ~~$27.5 million and~~$29.3 million. For the nine months ended September 30, 2018, our loss on derivative contracts included an unfavorable change in the fair value of derivative contracts of $73.4 ~~million. The~~million and a loss on settlement of derivative contracts ~~included $0.4 million net loss on settlement~~of $27.5 million. The change in the fair value of derivative contracts ~~prior to their maturity. We had a gain on derivative contracts of $2.4 million during~~from the nine months ended September 30, ~~2017 which included $2.3 million~~2018 to the same period in 2019 was related to changes in the ~~settlement~~future price outlook for oil and natural gas prices that had smaller negative impact on the fair value of our derivative contracts. Additionally, we had settlements received during 2019 for derivative contracts ~~prior~~on all commodities due to ~~their contractual maturity.~~favorable pricing compared to payments made during 2018 for oil derivative contracts due to unfavorable pricing.

Operating Expenses

Our operating expenses reflect costs incurred in the development, production and sale of oil, natural gas and NGLs. The following table provides information on our operating expenses:


	Nine Months Ended September 30,					Nine Months Ended September 30,
	2018		2017			2019			2018
	(in thousands, except per Boe)					(in thousands, except costs per Boe)
Operating Expenses
Production expenses	$	30,111	$	10,450		$	39,019		$	30,111
Gathering, transportation and processing ⁽¹⁾	—		11,360
Production taxes	10,892		2,057			14,943			10,892
Exploration expenses	30,129		4,475			38,472			30,129
Depreciation, depletion, amortization and accretion	83,630		22,176			141,969			83,630
General and administrative ⁽²⁾	40,283		22,062
Gain on sale of oil and natural gas properties	—		(838		)
General and administrative ⁽¹⁾						36,888			40,283
Gain on sale of other assets						(645		)	—
Total	$	195,045	$	71,742		$	270,646		$	195,045
Average Costs per Boe
Production expenses	$	2.75	$	2.94		$	2.79		$	2.75
Gathering, transportation and processing ⁽¹⁾	—		3.20
Production taxes	0.99		0.58			1.07			0.99
Exploration expenses	2.75		1.26			2.75			2.75
Depreciation, depletion, amortization and accretion	7.63		6.25			10.16			7.63
General and administrative ⁽²⁾	3.68		6.22
Gain on sale of oil and natural gas properties	—		(0.24		)
General and administrative ⁽¹⁾						2.64			3.68
Gain on sale of other assets						(0.05		)	—
Total	$	17.80	$	20.21		$	19.36		$	17.80

(1)

Gathering, transportation and processing for the nine months ended September 30, 2018 reflects the adoption of ASC 606 on January 1, 2018. The adoption of ASC 606 requires certain costs that were previously recorded as gathering, processing and transportation expenses to be accounted for as a deduction from revenue. We elected the modified retrospective method of transition. Accordingly, comparative information has not been adjusted and continues to be reported under the previous revenue standard.

~~(2)~~

General and administrative expenses for the nine months ended September 30, 2019 and 2018 include $2.8 million, or $0.20 per Boe, and $8.1 million, or $0.74 per Boe, of equity-based compensation ~~expense.~~expense, respectively. General and administrative expenses for the nine months ended September 30, 2019 includes $4.1 million, or $0.29 per Boe, of bad debt expense and $2.5 million, or $0.18 per Boe, of aborted offering costs.

Production expenses. Production expenses were $39.0 million, or $2.79 per Boe, for the nine months ended September 30, 2019, which was an increase of $8.9 million, or 30%, from $30.1 million, or $2.75 per Boe, for the nine months ended September 30, 2018. The increase in production expenses during 2019 compared to 2018 ~~which~~ was ~~an increase~~due to increased total production of ~~$19.7 million, or 188%, from $10.5 million, or $2.94 per Boe, for~~27% and increases in water hauling and disposal costs as a result of higher water volumes as well as increases in compression services during the nine months ended September 30, 2017. The increase in production expenses during 2018 compared to 2017 was primarily due to increased production. Due to certain production expenses being fixed, the increased production resulted in a decrease in production expense per Boe.

~~Gathering, transportation and processing.~~ Gathering, transportation, and processing costs were $11.4 million, or $3.20 per Boe, for the nine months ended September 30, 2017. As a result of adopting ASC 606 in January 2018, these costs are reflected as a deduction from revenue for the nine months ended September 30, 2018.2019.

Production taxes. Production taxes were $14.9 million for the nine months ended September 30, 2019, an increase of $4.1 million, or 37%, from $10.9 million for the nine months ended September 30, ~~2018, an increase of $8.8 million, or 430%, from $2.1~~2018. Production taxes primarily increased due to increased production tax rates, which became effective in July 2018.

Exploration expenses. Exploration expenses were $38.5 million for the nine months ended September 30, ~~2017. Production taxes primarily increased due to increased revenues.~~2019, an increase of $8.3 million, or 28%, from $30.1 million for the nine months ended September 30, 2018. Exploration expenses for the nine months ended September 30, 2019 included unproved leasehold

~~Exploration expenses.~~

amortization of $35.9 million and geological and geophysical expenses of $2.2 million. For the nine months ended September 30, 2018, exploration expenses ~~of $30.1 million primarily consisted of~~included unproved leasehold amortization of ~~unproved leasehold. For the nine months ended September 30, 2017, exploration~~$25.6 million and geological and geophysical expenses of $4.5 ~~million consisted of impairment expense recognized related to our unproved properties.~~million. The increase in ~~exploration expenses is due, in part, to amortization of~~ unproved leasehold ~~associated with~~amortization for the ~~oil and natural gas properties contributed by Linn.~~2019 period is primarily due to additional leasehold set to expire in upcoming periods.

Depreciation, depletion, amortization and accretion. Depreciation, depletion, amortization and accretion was $142.0 million, or $10.16 per Boe, for the nine months ended September 30, 2019, compared to $83.6 million, or $7.63 per Boe, for the nine months ended September 30, 2018, ~~and $22.2 million, or $6.25 per Boe, for the nine months ended September 30, 2017,~~ which is an increase of ~~$61.5~~$58.3 million or ~~277%~~70%. The increase in depreciation, depletion, amortization and accretion was primarily due to ~~increased production and, to a lesser extent,~~ an increase in the depletion rate for our oil and natural gas ~~properties.~~properties and to a lesser extent, increased production. The per Boe increase in the depletion rate is attributable to ~~higher~~ capital ~~expenditures.~~expenditures in the 2019 period.

General and administrative. General and administrative expenses were $36.9 million, or $2.64 per Boe, for the nine months ended September 30, 2019, a decrease of $3.4 million or 8% from $40.3 million, or $3.68 per Boe, for the nine months ended September 30, ~~2018, an increase of $18.2 million or 83% from $22.1 million, or $6.22 per Boe, for~~2018. During the nine months ended September 30, ~~2017.~~2019, general and administrative expenses included salaries and benefits of $18.4 million, equity-based compensation expense of $2.8 million, bad debt expense of $4.1 million, and aborted offering costs of $2.5 million. During the nine months ended September 30, 2018, general and administrative expenses included salaries and benefits of $13.7 million, equity-based compensation expense of $8.1 million and fees paid to Citizen and Linn under the MSAs of $10.0 million. Additionally, we incurred consulting and professional fees as part of the implementation of systems and processes and transition efforts in 2018. These expenses were offset by bonuses paid by Citizen of approximately $9.0 million and fees paid under the MSAs of $2.5 million during the nine months ended September 30, 2017. The MSAs with Citizen and Linn concluded in April 2018. Equity-based compensation during 2019 was reduced by forfeitures that occurred in the period.

Other Expenses

Interest expense, net. Interest expense, net of capitalized interest, for the nine months ended September 30, ~~2018~~2019 was ~~$5.0~~$26.6 million as compared to ~~$0.4~~$5.0 million for the nine months ended September 30, ~~2017.~~2018. This increase was due to increased borrowings outstanding during the nine months ended September 30, ~~2018~~2019 as compared to the nine months ended September 30, ~~2017.~~2018.

Income tax (benefit) expense. The income tax benefit for the nine months ended September 30, 2019 was $3.6 million and is the result of our effective tax rate applied to the net loss for the period. Income tax expense for the ~~nine~~three months ended September 30, 2018 was $299.7 million, ~~and relates to~~which reflects the recognition of a deferred tax liability upon becoming a taxable entity in conjunction with the Reorganization.

Liquidity and Capital Resources

Our primary sources of liquidity have been borrowings under our ~~credit facility~~Credit Facility and Term Loan and cash flows from operations. Our ability to fund planned capital expenditures depends in part on commodity prices, our future operating performance, availability of borrowings under our Credit Facility and Term Loan, the impact of redeterminations of our borrowing base, and, more broadly, on the availability of equity and debt financing, which is affected by prevailing economic conditions in our industry and financial, business and other factors, many of which are beyond our control. Our primary uses of capital have been for the exploration, development and acquisition of oil and natural gas properties.

As discussed in the Overview section above, we entered into a Merger Agreement which is expected to close in the fourth quarter of 2019 or early 2020. In the event that the Merger does not close, we will consider our current liquidity position as well as current market conditions in finalizing our operational plans for 2020.

Cash Flows

Our cash flows for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 are presented below:


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2019			2018
	(in thousands)						(in thousands)
Net cash provided by operating activities	$	206,644		$	59,248		$	169,998		$	206,644
Net cash used in investing activities	(510,868		)	(182,571		)	(446,041		)	(510,868		)
Net cash provided by financing activities	306,653			117,410			272,624			306,653
Net increase (decrease) in cash and cash equivalents	$	2,429		$	(5,913	)
Net (decrease) increase in cash and cash equivalents							$	(3,419	)	$	2,429

Cash flows provided by operating activities. Cash flows provided by operating activities for the nine months ended September 30, ~~2018~~2019 were ~~$206.6~~$170.0 million compared to ~~$59.2~~$206.6 million for the nine months ended September 30, ~~2017.~~2018. The ~~increase~~decrease in cash flows provided by operating activities in 2019 is primarily ~~related to~~driven by changes in working capital accounts, ~~and increased~~decreased revenues ~~partially offset by~~and higher cash expenses due to ~~increased activity~~a higher producing well count in ~~2018.~~2019.

Cash flows used in investing activities. Cash flows used in investing activities for the nine months ended September 30, ~~2018~~2019 were ~~$510.9~~$446.0 million compared to ~~$182.6~~$510.9 million for the nine months ended September 30, ~~2017.~~2018. The ~~increase~~decrease in cash flows used in investing activities in 2019 is due to the ~~increase~~decrease in capital expenditures on oil and natural gas properties resulting from the ~~increase~~decrease in drilling and completion activities in ~~2018~~2019 compared to ~~2017.~~the same period in 2018.

Cash flows provided by financing activities. Cash flows provided by financing activities for the nine months ended September 30, ~~2018~~2019 were ~~$306.7~~$272.6 million compared to ~~$117.4~~$306.7 million for the nine months ended September 30, ~~2017. The increase in cash~~2018. Cash flows provided by financing activities ~~for~~primarily consists of borrowings under our Credit Facility in both periods and our Term Loan in 2019. In 2019, we also had a repayment of a portion of the borrowings outstanding under the Credit Facility. The decrease in net activity on our debt facilities in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 is ~~attributable~~due to ~~borrowings of $309.3 million from our credit facility. Financing activity for~~ the ~~nine months ended September 30, 2017 were related~~decrease in drilling and completion activities in 2019 compared to capital contributions from Citizen members of $95.6 million and borrowings of $75.3 million, partially offset by distributions to Citizen members and repayments of $40.0 million on Citizen's credit facility.the same period in 2018.

Credit Facility

Our ~~2017~~ Credit Facility is a $750.0 million credit agreement with a maturity date of September 5, 2022. As of September 30, ~~2018~~2019, the borrowing base is set at ~~$675.0~~$750.0 million. Redetermination of the borrowing base generally occurs semiannually on or about October 1 and April 1. In October 2019, we entered into an amendment to our Credit Facility to postpone the October 2019 redetermination to January 2020 as well as to limit our borrowings under the Credit Facility to the lesser of (i) $732.6 million (ii) the borrowing base, (iii) the maximum aggregate amount (as defined in the credit agreement), or (iv) the total commitments (as defined in the agreement) until the January 2020 redetermination is effective.

As of September 30, ~~2018~~2019, we had ~~$394.6~~$732.6 million of outstanding borrowings and no letters of credit outstanding under the ~~2017~~ Credit Facility. Our borrowing base is contingent upon a number of factors, including the value of our reserves, the level of our production and changes in capital and operating costs. As a result, continued low commodity prices and reductions in drilling and completion activity may adversely impact the results of future redeterminations, which could have a significant impact on our liquidity.

Effective June 2019, the Credit Facility was amended to (i) reaffirm the borrowing base at $750.0 million, (ii) temporarily reduce the current ratio to 0.85 to 1.00 at June 30, 2019 and to 0.80 to 1.00 at September 30, 2019, (iii) increase the rates in the utilization grid for LIBOR and ABR loans by 0.25% until the Company delivers a compliance certificate demonstrating a current ratio of not less than 1.00 to 1.00, (iv) increase the mortgage coverage requirements from 85% to 95%; and (v) restrict certain payments between Roan Inc. and Roan LLC in the event that Roan LLC transfers any of its oil and natural gas properties to Roan Inc.

Amounts borrowed under the ~~2017~~ Credit Facility bear interest at LIBOR or the ~~ABR.~~ABR at our election. The rate used for ABR loans is based on the higher of the prime rate, the federal funds effective rate plus 0.50% or the one-month LIBOR rate plus 1%. Either rate is adjusted upward by an applicable margin (ranging from 2.00% to 3.00% for LIBOR and 1.00% to 2.00% for ~~ABR)~~ABR; provided that the applicable margin will currently range from 2.25% to 3.25% for LIBOR and 1.25% to 2.25% for ABR if Roan LLC has delivered a compliance certificate demonstrating a current ratio of less than 1.00 to 1.00), based on the utilization percentage of the ~~2017~~ Credit Facility. As our current ratio at September 30, 2019 is less than 1.00 to 1.00, the applicable margin will increase by 0.25%, as noted above, for the fourth quarter of 2019. Additionally, the ~~2017~~ Credit Facility provides

for a commitment fee of 0.375% to 0.50% based on utilization, which is payable at the end of each calendar quarter.

The ~~2017~~ Credit Facility contains representations, warranties, covenants, conditions and defaults customary for transactions of this type, including but not limited to: (i) limitations on liens and incurrence of debt covenants; (ii) limitations on the sale of property, mergers, consolidations and other similar transactions covenants; (iii) limitations on investments, loans and advances covenants; and (iv) limitations on dividends, distributions, redemptions and restricted payments covenants. Additionally, we are prohibited from hedging in excess of (a) 80% of reasonably anticipated projected production for the first thirty (30) month rolling period (based upon our internal projections) and (b) 80% of reasonably anticipated projected production from proved reserves for the second thirty (30) month rolling period of such sixty (60) month period (based on the most recently delivered reserve report). If the amount of borrowings outstanding exceed 50% of the borrowing base, we are required to hedge a minimum of 50% of the future production expected to be derived from proved developed reserves for the next eight quarters per our most recent reserve report.

The ~~2017~~ Credit Facility also contains financial covenants requiring us to comply with a leverage ratio of consolidated debt to consolidated EBITDAX (as defined in the credit agreement) for the period of four fiscal quarters then ended of not more than 4.00 to 1.00 and a current ratio of consolidated current assets to

consolidated current liabilities (as defined in the credit agreement to exclude non-cash assets and liabilities under ASC Topic 815 Derivatives and Hedging and ASC Topic 410 Asset Retirement and Environmental Obligations) as of not less than 0.80 to 1.00 for the ~~fiscal~~ quarter ended ofSeptember 30, 2019 and not less than 1.00 to ~~1.00.~~1.00 for all quarters thereafter.

As of September 30, ~~2018~~2019, we were in compliance with the covenants under the ~~2017~~Credit Facility and expect to remain in compliance for the next twelve months based on our current borrowing base. If we are not able to maintain compliance with the covenants under the Credit Facility in the future, we would be in default under the Credit Facility. A default, if not waived, could result in acceleration of the indebtedness outstanding under the Credit Facility and a default with respect to, and an acceleration of, the indebtedness outstanding under any other debt agreements, including the Term Loan. See “Risk Factors - Restrictions in our Credit Facility and Term Loan could limit our growth and our ability to engage in certain activities.”

Term Loan

In June 2019, we entered into a term loan facility (“Term Loan”) with initial commitments of $100.0 million and a potential incremental commitment of $50.0 million at our election. The lenders in the facility are funds affiliated with certain of our significant stockholders that are represented on the board of directors. The Term Loan matures in October 2020 and is secured by all of the assets of Roan Inc.

Borrowings under the Term Loan bear interest at the three-month LIBOR rate plus 7.5% or ABR rate plus 6.5%, as elected by us. The ABR rate is the highest of the prime rate, the federal funds effective rate plus 0.50% and the one-month LIBOR rate plus 1%. We can elect, subject to certain conditions included in the Term Loan agreement, to pay the interest on the Term Loan in kind. Interest is payable semi-annually for LIBOR loans and quarterly for ABR loans. The borrowings under the Term Loan are issued at a discount of 2.5%. Additionally, in conjunction with the initial Term Loan commitment and any future incremental commitments, we are required to issue shares to the lenders equal to approximately 1% of the outstanding Class A common stock at the time of the commitment.

As of September 30, 2019, we had borrowed $50.0 million and received proceeds of $47.8 million, which were net of the discount and certain issuance fees. These proceeds were primarily used to pay down amounts outstanding under the Credit Facility. As of September 30, 2019, the outstanding borrowings under the Term Loan have an interest rate of 9.60%. We issued 1,525,395 shares of Class A common stock in June 2019 to the lenders of the Term Loan and received cash equal to the par value of the shares issued in return. The difference between the fair market value of the shares issued and the amount paid for such shares was considered a fee paid to the lenders that will be amortized over the term of the Term Loan. The initial discount and all related financing costs are being amortized over the term of the Term Loan using the effective interest method.

In September 2019, the Term Loan was amended to permit the transfer of specified wellbore rights from Roan Inc. to Roan LLC. Additionally, we amended the Term Loan to specify that while the Merger Agreement is in effect no repayment premium would be due on any loans made after the amendment date and to specify that payment of interest in kind would not qualify as an additional loan under the Term Loan.

The Term Loan contains customary negative covenants including, but not limited to, restrictions on our ability to incur additional indebtedness or create certain liens on assets, restrictions on selling of assets and restrictions on investments, dividends and other specified transactions. These covenants are subject to a number of important exceptions and qualifications. The Term Loan also contains certain affirmative covenants which, among other things, requires us to maintain $10.0 million of liquidity, defined in the agreement as unrestricted cash plus the available borrowings under the Credit Facility, and require periodic financial and reserve reporting. In addition, the Term Loan agreement contains financial covenants consistent with those required by the Credit Facility.

As of September 30, 2019, we were in compliance with the covenants under the Term Loan and expect to remain in compliance for the next twelve months. If we are not able to maintain compliance with the covenants under the Term Loan in the future, we would be in default under the Term Loan. A default, if not waived, could result in acceleration of the indebtedness outstanding under the Term Loan and a default with respect to, and an acceleration of, the indebtedness outstanding under any other debt agreements, including the Credit Facility. See “Risk Factors - Restrictions in our Credit Facility and Term Loan could limit our growth and our ability to engage in certain activities.”

Capital Expenditures

Our primary needs for cash are development, exploration and acquisition of oil and natural gas assets, payment of contractual obligations and working capital obligations. ~~Funding~~To date, funding for these cash needs ~~may be~~has been provided by ~~any combination of~~ internally-generated cash flow and financing under our ~~2017~~ Credit ~~Facility.~~Facility and Term Loan.

~~Our capital budget for the fourth quarter of 2018 is $200 million to $225 million.~~

During the nine months ended September 30, ~~2018,~~2019, capital expenditures were ~~$558.0 million. Capital expenditures include expenditures related to~~$418.1 million, including drilling and completion ~~costs~~expenditures of ~~$474.7 million, leasehold additions~~$387.4 million. Our 2019 capital expenditures were more heavily weighted in the first half of ~~$73.5 million,~~the year as a result of increased completion activity as we developed our inventory of drilled but uncompleted wells from 2018.

In connection with the announcement of the Merger Agreement and ~~other costs~~appointment of ~~$9.8 million which includes corporate spending on other property~~our new CEO, we have temporarily reduced our drilling and ~~equipment.~~development activity and suspended all completion activity. As a result of this reduction in activity, we expect our fourth quarter capital expenditures to be significantly lower than capital expenditures during the prior three quarters of 2019 due in part to the anticipation of exiting 2019 with no rigs running. Capital expenditures for our operated properties are largely discretionary and within our control. We ~~could choose to defer a portion of these planned capital expenditures depending on a variety of factors, including but not limited to the success of~~evaluate commodity prices, our drilling activities, prevailing and anticipated prices for oil and natural gas, the availability of necessary equipment, infrastructure and capital, the receipt and timing of required regulatory permits and approvals, seasonal conditions, drilling and acquisition costs and the level of participation by other interest owners. We will continue to monitor commodity pricesfinancial position and overall market conditions and can ~~adjust our~~add rigs if beneficial. Based on the current supply and rig ~~cadence up~~availability in the area, we believe we would be able to quickly respond to market changes.

While we expect the merger transaction to close in late 2019 or ~~down in response~~early 2020, we continue to ~~changes in commodity prices~~plan and ~~overall market conditions.~~

position the business to operate on a standalone basis. Based upon current oil and natural gas prices and production expectations for the ~~remainder~~fourth quarter of ~~2018~~2019 and ~~2019,~~full year 2020 and our current borrowing base under our Credit Facility, we believe our cash flow from operations and cash on hand ~~borrowings under our 2017 Credit Facility and access to capital markets~~ will be sufficient to fund our operations for the next twelve months. However, future cash flows are subject to a number of variables, many of which are beyond our control, including the level of oil and natural gas production and commodity prices. Additionally, the current reduction in our drilling and completion activities could impact our future cash flows from operations more extensively than currently projected. The reduction in drilling and completion activities as well as oil and natural gas prices could also impact our borrowing base under our Credit Facility, which is scheduled to be redetermined in January 2020. The determination of the magnitude of our borrowing base as part of our recurring redeterminations is at the discretion of our lenders, who consider many factors, including commodity prices, the levels of our production and ~~significant additional~~reserves and changes

in capital ~~expenditures will be required~~and operating costs. If our borrowing base under our Credit Facility is materially reduced as part of the January 2020 redetermination, we may have limited ability to ~~more fully develop~~obtain the capital necessary to sustain our ~~properties.~~operations.

Working Capital

At September 30, ~~2018~~2019, we had a working capital deficit of ~~$183.1~~$26.5 million compared to ~~$121.2~~$42.2 million at December 31, ~~2017.~~2018. Current assets decreased by $71.4 million and current liabilities ~~increased~~decreased by ~~$150.7~~$87.0 million ~~and $212.6 million, respectively,~~ at September 30, ~~2018~~2019, compared to December 31, ~~2017 as a result of us taking over as operator in May 2018 on the oil and natural gas properties contributed to us by Citizen and Linn and increased drilling activity during~~ 2018. ~~Additionally, at the conclusion of the MSAs, we assumed certain working capital accounts associated with these properties from Citizen and Linn. Another~~The primary factor contributing to the ~~increase~~decrease in the working capital deficit is the ~~increase~~decrease in our accrued liabilities and drilling advances due to the decrease in our drilling and completion activities in 2019. This was partially offset by a decrease in the derivative contract ~~liabilities~~assets of ~~$54.9~~$33.5 million, which ~~is due to the~~reflects a negative impact of ~~higher~~increases in oil prices on the fair value of our open oil contracts with maturity dates in the next twelve months.

Off-Balance Sheet Arrangements

We enter into certain off-balance sheet arrangements and transactions, including operating lease arrangements and undrawn letters of credit. In addition, we enter into other contractual agreements in the normal course of business for processing and transportation as well as for other oil and natural gas activities. Other than the items discussed above, there are no other arrangements, transactions or other relationships with unconsolidated entities or other persons that are reasonably likely to materially affect our liquidity or capital resource positions.

Contractual Obligations

~~The following table summarizes our~~

Our contractual obligations ~~and commitments as of September 30, 2018:~~

Payments Due by Period
2018 2019 2020 2021 2022 Thereafter Total
(in thousands)
Credit Facility $ —
$ —
$ —
$ —
$ 394,639
$ —
$ 394,639
Interest expenses related to Credit Facility ⁽¹⁾
5,366
21,288
21,288
21,288
14,464
—
83,694
Pipe and equipment purchases commitments ⁽²⁾
1,925
—
—
—
—
—
1,925
Office building leases 489
1,677
2,047
2,136
2,229
627
9,205
Drilling rig commitments ⁽³⁾
8,050
15,352
—
—
—
—
23,402
Total contractual obligations and commitments $ 15,830
$ 38,317
$ 23,335
$ 23,424
$ 411,332
$ 627
$ 512,865

~~(1) Includes~~include long-term debt, cash interest expense on debt, pipe and equipment purchase commitments, office building leases, and drilling rig commitments. Since December 31, 2018, our outstanding borrowings ~~calculated using~~on our Credit Facility due in September 2022 have increased $218.0 million, which resulted in an increase in the estimated interest expense of $14.2 million based on a weighted average interest rate of ~~5.32% at September 30, 2018.~~

~~(2) Reflects commitments to purchase specified amounts~~5.24%. In addition, we have outstanding borrowings of ~~pipe and equipment.~~

~~(3) Reflects future minimum drilling fees including early termination fees as specified by~~$50.0 million on the ~~contract.~~

~~The above table does not include liabilities related to ARO. These are costs associated~~Term Loan with ~~the plugging~~a maturity date in October 2020 with estimated total interest expense of wells and the related abandonment of oil and natural gas properties. Estimating the future ARO requires management to make estimates and judgments regarding timing and existence of a liability that are subject to future revisions$5.2 million based ~~upon numerous factors, including the~~on an interest rate of ~~inflation, changing technology~~9.60%. There have been no other material changes in our contractual commitments and ~~the political~~obligations from amounts listed under “Part II, Item 7. Management’s Discussion and ~~regulatory environment.~~Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Contractual Obligations” in our Annual Report on Form 10‑K.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based on the condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires that management formulate estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors

that are believed to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. Although management believes they are reasonable, actual results could differ from these estimates and assumptions.

~~Recently Issued Accounting Standards~~

~~For a discussion of recently issued accounting standards, see~~ ~~Note 2 – Summary of Significant Accounting Policiesin the accompanying condensed consolidated financial statements.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a number of market risks including commodity price risk, credit risk and interest rate risk. The following information provides quantitative and qualitative information about our potential risks and how we seek to manage such risks.

Commodity Price Risk

The following table reflects our open commodity contracts as of September 30, ~~2018~~2019:


	2018		2019		2020		Total		2019		2020		2021		Total
Oil fixed prices swaps
Volume (Bbl)	1,233,180		5,540,670		1,599,500		8,373,350		1,200,730		3,429,500		1,730,000		6,360,230
Weighted-average price	$	57.09	$	59.86	$	63.14	$	60.08	$	60.75	$	60.57	$	56.08	$	59.38
Natural gas fixed price swaps
Volume (MMBtu)	8,004,000		29,200,000		12,325,000		49,529,000		11,040,000		19,665,000		7,250,000		37,955,000
Weighted-average price	$	2.94	$	2.86	$	2.63	$	2.81	$	2.90	$	2.63	$	2.65	$	2.71
Natural gas basis swaps
Volume (MMBtu)	4,600,000		21,900,000		3,640,000		30,140,000		7,360,000		10,980,000		—		18,340,000
Weighted-average price	$	0.54	$	0.58	$	0.62	$	0.58	$	0.52	$	0.49	$	—	$	0.50
Natural gas liquids fixed prices swaps
Volume (Bbl)									460,000		1,281,000		730,000		2,471,000
Weighted-average price									$	28.66	$	23.22	$	21.90	$	23.84



	2019		2020		2021		2022		2023		2024
Oil fixed price swaps
Volume (Bbl)	—		—		—		1,261,500		1,047,000		686,500
Weighted-average price	$	—	$	—	$	—	$	50.00	$	50.00	$	50.00
Natural gas fixed price swaps
Volume (MMBtu)	—		9,845,000		15,370,000		—		—		—
Weighted-average price	$	—	$	2.39	$	2.39	$	—	$	—	$	—
Natural gas basis swaps
Volume (MMBtu)	—		18,580,000		22,610,000		—		—		—
Weighted-average price	$	—	$	0.45	$	0.38	$	—	$	—	$	—
Natural gas liquids fixed price swaps
Volume (Bbl)	456,500		1,574,400		1,441,100		—		—		—
Weighted-average price	$	22.62	$	19.09	$	18.91	$	—	$	—	$	—

Our primary market risk exposure is in the price we receive for our oil, natural gas and NGL production. Pricing for oil, natural gas and NGL production has been volatile and unpredictable for several years, and we expect this volatility to continue in the future. To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in commodity prices, from time to time we enter into derivative arrangements for our oil and natural gas production. Our hedging instruments allow us to reduce, but not eliminate, the

potential effects of the variability in cash flow from operations due to fluctuations in oil and natural gas prices and provide increased certainty of cash flows. These derivatives are not designated as a hedging instrument for hedge accounting under GAAP and as such, gains or losses resulting from the change in fair value along with the gains or losses resulting from settlement of derivative contracts are reflected as gain or loss on derivative contracts included in the consolidated ~~statement~~statements of operations.

There are a variety of hedging strategies and instruments used to hedge future price risk. We utilize fixed price swaps and basis swaps to manage the price risk associated with forecasted sale of our oil and natural gas production. Fixed price swaps are settled monthly based on differences between the fixed price specified in the contract and the referenced settlement price. Basis swaps are settled monthly based on differences between a fixed price differential and the applicable market price differential. When the referenced settlement price is less than the price specified in the contract, we receive an amount from the counterparty based on the price difference multiplied by the volume. When the referenced settlement price exceeds the price

specified in the contract, we pay the counterparty an amount based on the price difference multiplied by the volume.

At September 30, ~~2018~~2019, we had a net ~~liability~~asset position of ~~$83.0~~$66.6 million related to our derivative contracts. Utilizing actual derivative contractual volumes under our fixed price swaps as of September 30, ~~2018~~2019, an increase of 10% in the forward curves associated with the underlying commodity would have ~~increased the~~decreased our net ~~liability~~asset position to ~~$156.2~~$21.4 million, while a decrease of 10% in the forward curves associated with the underlying commodity would have ~~resulted in a~~increased our net ~~liability~~asset position ~~of $16.0~~to $112.0 million.

Credit Risk

Our principal exposure to credit risk is through the sale of our oil, natural gas and NGL production, which we market to energy marketing companies and refineries, and to a lesser extent, our derivative counterparties.

We are subject to credit risk resulting from the concentration of oil, natural gas and NGL receivables with ~~two significant purchasers.~~four purchasers that individually comprise 10% or more of our revenue. We do not believe the loss of any single purchaser would materially impact our results of operations because oil, natural gas and NGLs are fungible products with well-established markets and numerous purchasers.

Our derivative transactions have been carried out in the over-the-counter market. The entry into derivative transactions in the over-the-counter market involves the risk that the counterparties, which are financial institutions, may be unable to meet the financial terms of the transactions. We monitor on an ongoing basis the credit ratings of our derivative counterparties and consider their credit default risk ratings in determining the fair value of our derivative contracts. Our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty. The counterparties to our derivative contracts at September 30, ~~2018~~2019, are also lenders under our ~~2017~~ Credit Facility. As a result, we do not require collateral or other security from counterparties nor are we required to post collateral to support derivative instruments. We have master netting agreements with all of our derivative counterparties, which allow us to net our derivative assets and liabilities with the same counterparty. As a result of the netting provisions, our maximum amount of loss under derivative transactions due to credit risk is limited to the net amounts due from the counterparties under the derivative contracts.

Interest Rate Risk

We are subject to market risk exposure related to changes in interest rates on our indebtedness under our ~~2017~~ Credit ~~Facility.~~Facility and Term Loan. The terms of ~~our 2017~~the Credit Facility and Term Loan provide for interest on

borrowings at LIBOR or ~~the alternate base rate,~~ABR, in each case adjusted upward by an applicable margin ~~based on the utilization percentage of the credit facility.~~as defined in each agreement.

As of September 30, ~~2018~~2019, we had ~~$394.6~~$782.6 million in outstanding borrowings under our ~~2017~~ Credit ~~Facility.~~Facility and Term Loan. At September 30, ~~2018,~~2019, the weighted average interest rate on ~~borrowings under~~ our ~~2017 Credit Facility~~debt was ~~5.32%~~5.52%. An increase or decrease of 1% in the interest rate would have a corresponding increase or decrease in our interest expense of approximately ~~$3.9~~$7.8 million based on outstanding borrowings of ~~$394.6~~$782.6 million ~~under our 2017 Credit Facility~~ as of September 30, ~~2018~~2019.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

As required by Rule 13a-15 and 15d-15 of the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined

in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required ~~disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.~~disclosure. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective at September 30, ~~2018 at the reasonable assurance level~~2019 because of the material weaknesses in our internal control over financial reporting as further described below.

Identification of Material Weaknesses

WeAs described in Item 9A of our 2018 Form 10-K, we have identified the following material weaknesses in our internal control over financial reporting in connection with the audit of our financial statements as of and for the years ended December 31, 2017 and 2016. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.reporting.

We ~~have identified five material weaknesses in our internal control over financial reporting. The material weaknesses identified relate to~~had an overall lack of qualified personnel within the organization who possessed an appropriate level of expertise, experience and training to effectively design, implement and maintain:

(i) ~~adequate~~Adequate controls to monitor and assess the control environment. Specifically, internal controls were not designed or operating effectively to ensure appropriate monitoring or assessment of the control environment, including utilizing an appropriate control ~~framework;~~ framework.

(ii) ~~adequate~~Adequate controls to establish appropriate entity level controls. Specifically, internal controls were not designed or operating effectively to ensure a sufficient amount of entity level controls were in place and operating ~~effectively;~~ effectively.

(iii) ~~effective~~Effective controls over our period-end financial reporting processes, including controls over the preparation, analysis and review of certain significant account reconciliations required to assess the appropriateness of account balances at period-end; and controls over segregation of duties and the review of manual journal entries. Specifically, we did not design and maintain effective controls to verify that journal entries were properly prepared with sufficient supporting documentation or were reviewed and approved to ensure the accuracy and completeness of the manual journal entries. Additionally, certain key accounting personnel have the ability to prepare and post journal entries, as well as review account reconciliations, without an independent review by someone other than the ~~preparer; and~~ preparer.

(iv) ~~effective~~Effective controls over information technology systems that are relevant to the preparation of the financial statements. Specifically, we did not design and maintain (a) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to infrastructure,

financial applications, programs, and data to appropriate personnel, (b) program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately, (c) computer operation controls to ensure all financially significant batch jobs are monitored for the completeness and accuracy of data transfer, and (d) program development controls to ensure that new software development is aligned with business and IT requirements. The deficiencies described in this clause (iv), when aggregated, could impact both maintaining effective segregation of duties and the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected in a timely ~~manner;~~manner.

(v) Effective controls over our reservoir engineering process for estimating proved oil, natural gas and ~~(v) a~~NGL reserves, which are used in the calculation of depletion of the Company’s oil and natural gas properties. Specifically, we did not maintain effective controls to verify that the Company’s ownership interests in its oil and natural gas properties used in the reservoir engineering process are sufficiently reviewed to ensure completeness and accuracy of the information.

(vi) A sufficient complement of resources with an appropriate level of accounting knowledge, experience and training to

develop and maintain an effective internal control environment. ~~These material weaknesses originated with Citizen, the predecessor of Roan LLC, which had a lack of sufficient resources and inadequate control systems as it commenced operations as a private company.~~

These material weaknesses did not result in any material misstatements of our financial statements or disclosures. The ~~control deficiencies discussed above~~material weaknesses could, however, result in a misstatement of relevant account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. ~~Accordingly, our management has determined that these control deficiencies constitute material weaknesses.~~

Remediation Plan for the Material Weaknesses

We have taken and will continue to take a number of actions to remediate these material weaknesses. We ~~are currently implementing~~have implemented measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material ~~weaknesses, including but not limited to,~~weaknesses. Specifically, we have (i) ~~hiring~~hired additional IT and accounting personnel with appropriate technical skillsets, (ii) ~~initiating~~initiated design and implementation of our control environment, including the expansion of formal accounting and IT policies and procedures and financial reporting controls, (iii) ~~conducting~~conducted a company-wide assessment of our control environment, (iv) ~~implementing~~implemented appropriate review and oversight responsibilities within the accounting, ~~and~~ financial reporting, and reservoir engineering functions and (v) ~~evaluating~~evaluated controls over our information technology environment. To remediate our existing material weaknesses, we require additional time to demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We can give no assurance that these actions will remediate these material weaknesses in internal controls or that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

Changes in Internal Control over Financial Reporting.

~~Except as described herein, there~~There were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2018~~,2019, which materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are a party to ~~proceedings~~lawsuits arising in the ordinary course of our business, including, but not limited to, commercial disputes, personal injury claims, royalty claims, property damage claims and contract actions. We cannot predict the outcome of any such lawsuits with certainty, but management does not currently believe that any pending or threatened legal matters will have a material adverse impact on our financial condition.

Due to the nature of our business, we are, from time to time, involved in other routine litigation or subject to disputes or claims ~~incidental~~related to our ~~business. While many~~business activities, including workers’ compensation claims and employment related disputes. In the opinion of our management, none of these other ~~matters involve inherent uncertainty, we believe that the liability,~~pending litigation disputes or claims against us, if ~~any, ultimately incurred with respect to such other proceedings and claims~~decided adversely, will ~~not~~ have a material adverse effect on our ~~consolidated~~ financial ~~position as a whole~~condition, cash flows or ~~on our liquidity, capital resources or future~~ results of operations. We will continue to evaluate proceedings and claims involving us on a regular basis and will establish and adjust any reserves as appropriate to reflect our assessment of the then current status of the matters.

We ~~maintain insurance against some risks associated with above or underground contamination that may occur~~previously self-disclosed to the Oklahoma Department of Environmental Quality (“ODEQ”) potential violations related to the failure to obtain air permits and to perform equipment leak inspections as ~~a result~~required by applicable regulations at certain of our ~~exploration and production activities. There can be no assurance~~facilities. We are currently in the process of negotiating a resolution of these issues with the ODEQ. No penalty amount has been proposed; however, we do not believe that ~~this insurance~~the resolution will continue to be commercially available or that this insurance will be available at premium levels that justify its purchase by us. The occurrence of a significant event that is not fully insured or indemnified against could have a ~~materially~~material adverse effect on our financial condition, ~~and~~cash flows or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading ~~"Risk Factors"~~“Risk Factors” included in our ~~Current~~Annual Report on Form ~~8-K filed~~10-K and our Quarterly Reports on ~~September 24, 2018,~~Form 10-Q, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently

deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in the ~~Current~~Annual Report on Form 10-K and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2019 and June 30, 2019, except as set forth below.

~~The marketability~~Risk Factors Related to our Indebtedness

Restrictions in our Credit Facility and ~~pricing~~Term Loan could limit our growth and our ability to engage in certain activities.

Our Credit Facility and Term Loan contain a number of significant covenants, including restrictive covenants that may limit our ability to, among other things:

incur additional indebtedness;

incur liens;

enter into mergers;

sell assets;

make investments and loans;

make or declare dividends;

make certain payments to Roan LLC;

enter into commodity hedges exceeding a specified percentage of our expected production ~~is dependent upon transportation~~or proved reserves;

enter into interest rate hedges exceeding a specified percentage of our outstanding indebtedness; and ~~other facilities~~

engage in transactions with affiliates.

In addition, our Credit Facility and ~~various market factors, which~~Term Loan require us to maintain certain financial ratios or to reduce our indebtedness if we ~~generally do not control. If these facilities~~ are ~~unavailable or~~unable to comply with such ratios. In June 2019, we ~~become subject~~used the majority of the proceeds from the Term Loan borrowing to ~~adverse pricing differentials,~~pay down a portion of the outstanding borrowings under the Credit Facility and amended the Credit Facility in order to improve our ~~operations could be interrupted~~leverage position and our ~~revenues reduced.~~ability to meet upcoming covenants.

The ~~marketability of~~restrictions in our ~~oil, natural gas~~Credit Facility and NGL production depends in part upon the availability, proximity and capacity of transportation and other production facilities owned by third parties. Insufficient production from our wells to support the construction of pipeline facilities by our purchasers or a significant disruption in the availability of our or third-party transportation facilities or other production facilities could adversely impactTerm Loan may also limit our ability to ~~produce or deliver~~obtain future financings to ~~market our oil, natural gas and NGLs, causing~~withstand a ~~significant interruption~~future downturn in our ~~operations. While~~business or the economy in general, or to otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of the limitations that the restrictive covenants under our Credit Facility and Term Loan impose on us.

A breach of any covenant in our Credit Facility or Term Loan would result in a default under such facility after any applicable grace periods. A default, if not waived, could result in acceleration of the indebtedness outstanding under our Credit Facility and Term Loan and in a default with respect to, and an acceleration of, the indebtedness outstanding under any other debt agreements. The accelerated indebtedness would become immediately due and payable. If that occurs, we ~~believe we have reserved sufficient capacity with third-party facilities to gather, process, fractionate and transport a significant portion of our projected production, that capacity~~ may not be ~~sufficient~~able to ~~handle~~make all of ~~our production,~~the required payments or ~~these third-party facilities may experience delays in construction, mechanical problems or become unavailable~~borrow sufficient funds to ~~us due to unforeseen circumstances.~~refinance such indebtedness on acceptable terms, if at all.

~~Additionally,~~Risk Factors Relating to the Merger

The announcement and pendency of the proposed Merger may adversely affect our business, financial condition and results of operations, and, whether or not the Merger is consummated, we ~~depend on various trucking providers for our oil production~~have incurred and ~~on two third-party midstream companies for substantially all~~will continue to incur significant costs, fees and expenses relating to professional services and transaction fees.

The Merger Agreement generally requires us to use commercially reasonable efforts to, and cause each of our ~~current natural gas~~subsidiaries to use commercially reasonable efforts to, conduct our operations within the Company Operations Plan (as defined in the Merger Agreement) pending consummation of the proposed Merger and ~~NGL production. Our current natural gas~~restricts us, without Citizen Operating’s consent, from taking certain specified actions until the proposed Merger is completed. Furthermore, following the announcement of the proposed Merger, the Company elected to temporarily reduce its drilling and ~~NGL~~development activity and to suspend all completion activity, which will have a material adverse effect on its cash flows from operations. These restrictions may affect our ability to execute our business strategies, respond effectively to competitive pressures and industry developments, pursue alternative business opportunities or strategic transactions, undertake significant capital projects, undertake significant financing transactions, modify our lease arrangements ~~provide for pricing at Mont Belvieu, Texas, but future arrangements could be tied~~and otherwise pursue other actions that are not within the Company Operations Plan, even if such actions would constitute appropriate changes to ~~pricing at Conway, Kansas or~~our business and help us attain our financial and other ~~market hubs~~goals, and, ~~subject us to adverse pricing differentials. In the future, we~~as a result, these restrictions may be required to find alternative markets and gathering, processing or fractionation arrangements for our production, and such alternative arrangements may only be available on unfavorable terms, or not at all. If we are unable, for any sustained period, to access these third-party facilities or find acceptable alternative arrangements, we may be required to shut in or curtail production. Any such shut in or curtailment, or an inability to obtain favorable terms for gathering, processing, fractionating and delivering the oil, natural gas and NGLs produced from our fields, would materially and adversely affectimpact our financial condition and results of operations.

Employee retention, motivation and recruitment may be challenging before the completion of the proposed Merger, as employees and prospective employees may experience uncertainty about their future roles with the Company following the consummation of the proposed Merger. If, despite our retention efforts, key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the Company following the consummation of the proposed Merger, or if an insufficient number

of employees are retained to maintain effective operations, our business, financial condition and results of operations could be adversely affected.

The proposed Merger could also cause disruptions to our business or business relationships, which could have an adverse impact on our business, financial condition and results of operations. Parties with which we have business relationships, including customers and suppliers, may experience uncertainty as to the future of such relationships and may delay or defer certain business decisions concerning our products or services, seek alternative relationships with third parties or seek to alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business relationships may seek alternative relationships with third parties. Customers, suppliers, vendors, lenders and other business partners may also seek to change existing agreements with us as a result of the proposed Merger. Any such delay or deferral of those decisions or changes in existing agreements could adversely impact our business, regardless of whether the proposed Merger is ultimately consummated. The consummation of the proposed Merger may adversely affect our relationship with our customers, vendors, suppliers, lenders or other business partners.

The pursuit of the proposed Merger and the preparation for the integration may place a significant burden on management and internal resources. The diversion of management’s time, efforts, resources and attention away from day-to-day business concerns that could have been otherwise beneficial to us could adversely affect our business, financial condition and results of operations.

We could also be subject to litigation related to the proposed Merger, which could prevent or delay the consummation of the proposed Merger or result in significant costs and expenses. It is possible that stockholders may file lawsuits challenging the proposed Merger or the other transactions contemplated by the Merger Agreement, which may name us and/or our board of directors as defendants. We cannot assure you as to the outcome of such lawsuits, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the proposed Merger on the agreed-upon terms, such an injunction may delay the consummation of the proposed Merger in the expected timeframe, or may prevent the proposed Merger from being consummated altogether. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs and divert management’s attention and resources, which could adversely affect the operation of our business.

In addition to potential litigation-related expenses, we have incurred and will continue to incur other significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, and many of these fees and costs are payable regardless of whether or not the proposed Merger is consummated. Payment of these costs, fees and expenses could adversely affect our business, financial condition and results of operations.

Our inability to complete the Merger, or to complete the Merger in a timely manner, including as a result of the failure to obtain stockholder approval to adopt the Merger Agreement, the failure to obtain required regulatory approvals or the failure to satisfy the other conditions to the consummation of the Merger could negatively affect our business, financial condition and results of operations.

The Merger is subject to various closing conditions such as the approval of our stockholders, as well as certain regulatory approvals in the United States and other jurisdictions, among other customary closing conditions. It is possible that our stockholders will not approve the Merger or that a governmental authority may prohibit, enjoin or refuse to grant approval for the consummation of the Merger. If any condition to the closing of the Merger is not satisfied or, if permissible, not waived, the Merger will not be completed. In

addition, satisfying the conditions to the closing of the Merger may take longer than we expect. There can be no assurance that any of the conditions to closing will be satisfied or waived or that other events will not intervene to delay or result in the failure to consummate the Merger.

If the Merger is not completed for any reason, our stockholders would not receive any payment for their shares in connection with the Merger, and we would remain an independent public company, with our shares continuing to be traded on the New York Stock Exchange. Depending on the circumstances that would have caused the Merger not to be completed, the price of the Class A common stock may decline materially. If that were to occur, it is uncertain when, if ever, the Class A common stock would return to the price levels at which the shares currently trade.

The Merger Agreement contains provisions that could discourage a potential competing acquirer of the Company, including the payment of a termination fee.

The Merger Agreement contains provisions that, subject to limited exceptions, restrict our ability to (i) continue to engage in discussions, solicitations or negotiations regarding an Alternative Proposal (as defined in the Merger Agreement), (ii) initiate, solicit, knowingly encourage, knowingly induce or knowingly facilitate (including by way of furnishing information) an Alternative Proposal, (iii) participate or engage in or otherwise knowingly facilitate any discussions or negotiations regarding, or furnish to any person any information or date relating to us or any of our subsidiaries, in connection with an Alternative Proposal, (iv) approve, endorse or recommend an Alternative Proposal or (v) enter into any letter of intent, term sheet, memorandum of understating, merger agreement, acquisition agreement, exchange agreement or any other agreement with respect to an Alternative Proposal or requiring us to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by the Merger Agreement. In addition, before our board of directors withdraws, qualifies or modifies its recommendation of the proposed Merger or terminates the Merger Agreement to enter into a definitive agreement with respect to a competing transaction, Citizen Operating generally has an opportunity to offer to modify the terms of the proposed Merger. In some circumstances, upon termination of the Merger Agreement, we will be required to pay a termination fee equal to $25 million.

These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of us from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the per share consideration payable upon consummation of the proposed Merger, or might otherwise result in a potential third-party acquirer proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

If the Merger Agreement is terminated and we decide to seek another business combination, we may not be able to negotiate or consummate a transaction with another party on terms comparable to, or better than, the terms of the Merger Agreement.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None other than previously disclosed in the Current Report.~~

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits



Exhibit No.		Exhibit
2.1		Linn Merger Agreement, dated September 24, 2018, by and among Linn Energy, Inc., Roan Resources, Inc. and Linn Merger Sub #2, LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed on September 24, 2018)
2.2		Roan Merger Agreement, dated September 24, 2018, by and among Roan Holdings, LLC, Roan Holdings Holdco, LLC, Roan Resource, Inc. and Linn Merger Sub #3, LLC (incorporated by reference to Exhibit 2.2 to Form 8-K filed on September 24, 2018)
2.3		Master Reorganization Agreement, dated September 17, 2018, by and among Linn Energy, Inc., Roan Holdings, LLC, and Roan Resources LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed by Linn Energy, Inc. on September 21, 2018)
2.4		Separation and Distribution Agreement, dated August 7, 2018, by and between Linn Energy, Inc. and Riviera Resources, Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed by Linn Energy, Inc. on August 10, 2018)
2.5		Agreement and Plan of Merger, dated July 25, 2018, by and among Linn Energy Inc., New LINN Inc. and Linn Merger Sub #1, LLC (incorporated by reference to Exhibit 2.1 to Form 8-K filed by Linn Energy, Inc. on July 26, 2018)
2.6		Agreement and Plan of Merger, dated as of October 1, 2019, by and among Citizen Energy Operating, LLC, Citizen Energy Pressburg Inc. and Roan Resources, Inc. (incorporated by reference to Exhibit 2.1 to Form 8-K filed on October 1, 2019)
3.1		Second Amended and Restated Certificate of Incorporation of Roan Resources, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed on September 27, 2018)
3.2		Second Amended and Restated Bylaws of Roan Resources, Inc. (incorporated by reference to Exhibit 3.2 to Form 8-K filed on September 27, 2018)
4.1		Registration Rights Agreement, dated September 24, 2018, by and among Roan Resources, Inc. and each of the other parties listed on the signature page thereto (incorporated by reference to Exhibit 4.1 to Form 8-K filed on September 24, 2018)
4.2		Stockholders Agreement, dated September 24, 2018, by and among Roan Resources, Inc., the Existing LINN Owners (as defined therein), Roan Holdings, LLC and any other persons signatory thereto from time to time (incorporated by reference to Exhibit 4.2 to Form 8-K filed on September 24, 2018)
4.3		Amendment to the Registration Rights Agreement, dated June 26, 2019, by and among Roan Resources, Inc. and each of the other parties listed on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Form 8-K filed on June 28, 2019)
10.1		Amendment No. 1 to Credit Agreement, dated September ~~5, 2017, by and among Citibank, N.A., as administrative agent for the Lenders~~16, 2019 (incorporated by reference to Exhibit 10.1 to Form 8-K filed on September ~~24, 2018)~~23, 2019)
10.2		~~Amendment No. 1 to Credit~~Form of Voting Agreement ~~dated April 9, 2018~~ (incorporated by reference to Exhibit ~~10.2~~10.1 to Form 8-K filed on ~~September 24, 2018)~~October 1, 2019)
10.3		Amendment No. 2 to Credit Agreement, dated ~~May~~September 30, ~~2018~~2019 (incorporated by reference to Exhibit 10.2 to Form 8-K filed on October 1, 2019)
10.4†		Employment Agreement, dated September 29, 2019, between Roan Resources LLC, Roan Resources, Inc. and Rick Gideon (incorporated by reference to Exhibit 10.3 to Form 8-K filed on ~~September 24, 2018)~~October 1, 2019)
10.5		Indemnification Agreement, dated September 29, 2019, between Roan Resources, Inc. and Rick Gideon (incorporated by reference to Exhibit 10.4 to Form 8-K filed on October 1, 2019)
10.6		Amendment No. 36 to Credit Agreement, dated ~~September 27, 2018~~October 25, 2019 (incorporated by reference to Exhibit 10.1 to Form 8-K filed on ~~September 27, 2018)~~
~~10.5~~†		~~Roan Resources, Inc. Amended and Restated Management Incentive Plan, dated September 24, 2018 (incorporated by reference to Exhibit 10.4 to Form 8-K filed on September 24, 2018~~
~~10.6~~†		Form of Performance Share Unit Grant Notice and Performance Share Unit Award Agreement pursuant to the Roan Resources, Inc. Amended and Restated Management Incentive Plan (incorporated by reference to Exhibit 10.5 to Form 8-K filed on September 24, 2018)October 30, 2019)
10.7		~~Voting~~Assignment Agreement, dated ~~September 24, 2018,~~October 25, 2019, by and among Roan Resources, Inc., the Existing LINN Owners (as defined therein), Roan Holdings, LLC and any other persons signatory thereto from time to time (incorporated by reference to Exhibit 10.6 to Form 8-K filed on September 24, 2018)
~~10.8~~		~~Second Amended and Restated Limited Liability Company Agreement of Roan Resources LLC (incorporated by reference to Exhibit 10.7 to Form 8-K filed on September 24, 2018)~~
~~10.9~~†		~~Amended and Restated Employment Agreement, dated November 6, 2017,~~ between Roan Resources, Inc. and ~~Tony Maranto (incorporated by reference to Exhibit 10.8 to Form 8-K filed on September 24, 2018)~~
~~10.10~~†		~~Employment Agreement, dated June 18, 2018, between~~ Roan Resources LLC ~~and David Edwards (incorporated by reference to Exhibit 10.9 to Form 8-K filed on September 24, 2018)~~
~~10.11~~†		~~Employment Agreement, dated November 6, 2017, between Roan Resources LLC and Joel Pettit (incorporated by reference to Exhibit 10.10 to Form 8-K filed on September 24, 2018)~~
~~10.12~~†		~~Employment Agreement, dated November 6, 2017, between Roan Resources LLC and Greg Condray (incorporated by reference to Exhibit 10.11 to Form 8-K filed on September 24, 2018)~~
~~10.13~~†		~~Employment Agreement, dated September 17, 2018, between Roan Resources LLC and David Treadwell (incorporated by reference to Exhibit 10.12 to Form 8-K filed on September 24, 2018)~~



~~10.14~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and Tony Maranto (incorporated by reference to Exhibit 10.13 to Form 8-K filed on September 24, 2018)~~
~~10.15~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and Matthew Bonanno (incorporated by reference to Exhibit 10.14 to Form 8-K filed on September 24, 2018)~~
~~10.16~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and Evan Lederman (incorporated by reference to Exhibit 10.15 to Form 8-K filed on September 24, 2018)~~
~~10.17~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and John Lovoi (incorporated by reference to Exhibit 10.16 to Form 8-K filed on September 24, 2018)~~
~~10.18~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and Paul B. Loyd Jr. (incorporated by reference to Exhibit 10.17 to Form 8-K filed on September 24, 2018)~~
~~10.19~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and Michael Raleigh (incorporated by reference to Exhibit 10.18 to Form 8-K filed on September 24, 2018)~~
~~10.20~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and Andrew Taylor (incorporated by reference to Exhibit 10.19 to Form 8-K filed on September 24, 2018)~~
~~10.21~~		~~Indemnification Agreement, dated September 24, 2018, between Roan Resources, Inc. and Anthony Tripodo (incorporated by reference to Exhibit 10.20 to Form 8-K filed on September 24, 2018)~~
~~10.22~~		Tax Matters Agreement, dated August 7, 2018, by and among Linn Energy, Inc., Riviera Resources, Inc. and the Riviera Resources, Inc. Subsidiaries (incorporated by reference to Exhibit 10.1 to Form 8-K filed by Linn Energy, Inc. on August 10, 2018)
~~10.23~~		~~Transition Services Agreement, dated August 7, 2018, by and between Linn Energy, Inc. and Riviera Resources, Inc.~~ (incorporated by reference to Exhibit 10.2 to Form 8-K filed ~~by Linn Energy, Inc.~~ on ~~August 10, 2018)~~October 30, 2019)
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document



101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith
** Furnished herewith
† Compensatory plan or arrangement

5060

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ROAN RESOURCES, INC.





Date:	November ~~13, 2018~~6, 2019	/s/ ~~Tony C. Maranto~~Richard Gideon
		~~Tony C. Maranto~~Richard Gideon
		~~Chairman, President and~~ Chief Executive Officer
		(Principal Executive Officer)



Date:	November ~~13, 2018~~6, 2019	/s/ David M. Edwards
		David M. Edwards
		Chief Financial Officer
		(Principal Financial Officer)

5161



	Stockholders' Equity
	Common Stock (Shares)	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Members' Equity			Total Equity
	(in thousands)
Balance at December 31, 2017	—	$	—	$	—	$	—		$	1,584,769		$	1,584,769
Acquisition of oil and natural gas properties in exchange for equity units	—	—		—		—			39,906			39,906
Equity-based compensation ⁽¹⁾	—	—		192		—			7,868			8,060
Net loss ⁽¹⁾	—	—		—		(299,765		)	10,849			(288,916		)
Issuance of common stock upon Reorganization	152,540	153		1,643,239		—			(1,643,392		)	—
Balance at September 30, 2018	152,540	$	153	$	1,643,431	$	(299,765	)	$	—		$	1,343,819



	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
	Under ASC 606			Under ASC 605			Increase/ (decrease)			Under ASC 606			Under ASC 605			Increase/ (decrease)
	(in thousands)
Revenues
Oil sales	$	74,987		$	75,062		$	(75	)	$	197,356		$	197,431		$	(75	)
Natural gas sales	$	18,059		$	21,739		$	(3,680	)	$	48,956		$	60,919		$	(11,963	)
Natural gas liquid sales	$	27,106		$	35,195		$	(8,089	)	$	65,377		$	83,735		$	(18,358	)

Operating expenses
Gathering, transportation and processing	$	—		$	11,844		$	(11,844	)	$	—		$	30,396		$	(30,396	)

Net loss	$	(301,240	)	$	(301,240	)	$	—		$	(288,916	)	$	(288,916	)	$	—



Consideration given
Equity units	$	1,281,743
Allocation of purchase price
Inventory	$	205
Proved oil and natural gas properties	214,647
Unproved oil and natural gas properties	1,086,600
Total assets acquired	1,301,452
Asset retirement obligations	(7,547		)
Revenue suspense	(12,162		)
Total fair value of net assets acquired	$	1,281,743



	Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017
	(in thousands)
Revenue	$	55,119	$	156,593
Net income	$	17,052	$	55,253



	Six Months Ended June 30, 2018			Three Months Ended September 30, 2018
Company enterprise value (in billions)	$	4.56		$	4.19
Equity volatility	34.0		%	36.0		%
Weighted average risk-free interest rate	1.96		%	2.54		%



Deferred income tax assets (liabilities):
Oil and natural gas properties	$	(322,911	)
Derivative contracts	22,530
Other	719
Deferred tax liabilities, net	$	(299,662	)



	Payments Due by Period
	2018		2019		2020		2021		2022		Thereafter		Total
	(in thousands)
Credit Facility	$	—	$	—	$	—	$	—	$	394,639	$	—	$	394,639
Interest expenses related to Credit Facility ⁽¹⁾	5,366		21,288		21,288		21,288		14,464		—		83,694
Pipe and equipment purchases commitments ⁽²⁾	1,925		—		—		—		—		—		1,925
Office building leases	489		1,677		2,047		2,136		2,229		627		9,205
Drilling rig commitments ⁽³⁾	8,050		15,352		—		—		—		—		23,402
Total contractual obligations and commitments	$	15,830	$	38,317	$	23,335	$	23,424	$	411,332	$	627	$	512,865