RIVIERA RESOURCES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

November 03, 2020 at 02:51 am IST

The following discussion and analysis should be read in conjunction with the
financial statements and related notes included elsewhere in this Quarterly
Report on Form 10-Q and in the Company's Annual Report on Form 10K for the year
ended December 31, 2019. The following discussion contains forward-looking
statements based on expectations, estimates and assumptions. Actual results may
differ materially from those discussed in the forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, volatility of oil, natural gas and natural gas liquids
("NGL") prices or a prolonged period of low oil, natural gas or NGL prices and
the effects of actions by, or disputes among or between, members of the
Organization of Petroleum Exporting Countries and other oil producing nations
("OPEC+"), such as Saudi Arabia, and other oil and natural gas producing
countries, such as Russia, with respect to production levels or other matters
related to the price of oil, the effects of excess supply of oil and natural gas
resulting from the reduced demand caused by the novel coronavirus disease
("COVID-19") global pandemic and the actions by certain oil and natural gas
producing countries, market prices for oil, natural gas and NGLs, production
volumes, estimates of proved reserves, capital expenditures, the capacity and
utilization of midstream facilities, economic and competitive conditions, credit
and capital market conditions, regulatory changes and other uncertainties, as
well as those factors set forth in "Cautionary Statement Regarding
Forward-Looking Statements" below and in Item 1A. "Risk Factors" in this
Quarterly Report on Form 10Q and in the Company's Annual Report on Form 10K
for the year ended December 31, 2019, and elsewhere in the Annual Report.

The reference to a "Note" herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1. "Financial Statements."



Unless otherwise indicated or the context otherwise requires, references herein
to the "Company" refer to Riviera Resources, Inc. ("Riviera") and its
consolidated subsidiaries. Unless otherwise indicated or the context otherwise
requires, references herein to "LINN Energy" refer to Linn Energy, Inc. and its
consolidated subsidiaries.

In 2016, Linn Energy, LLC, certain of its direct and indirect subsidiaries, and
LinnCo, LLC (collectively, the "LINN Debtors") filed Bankruptcy Petitions for
relief under Chapter 11 of the Bankruptcy Code. The LINN Debtors emerged from
bankruptcy in 2017. See Note 10 for additional details. In 2018, LINN Energy
completed the spin-off of Riviera from LINN Energy. The Company is incorporated
under Delaware law and its headquarters are in Houston, Texas.

Executive Overview



Prior to the recent sales of interests in oil and natural gas properties and the
sale of its wholly owned subsidiary Blue Mountain Midstream LLC ("Blue Mountain
Midstream"), discussed below, Riviera was an independent oil and natural gas
company. The Company had two reporting segments, upstream and Blue Mountain. The
upstream reporting segment was engaged in the exploration, development,
production, and sale of oil, natural gas, and NGLs and its properties were all
located in the United States ("U.S."). The Blue Mountain reporting segment
consisted of a cryogenic natural gas processing facility, a network of gathering
pipelines and compressors and produced water services and a crude oil gathering
system located in the Merge/SCOOP/STACK play.

On September 1, 2020 and October 1, 2020, the Company completed the sales of
interests in properties located in its two upstream operating regions, North
Louisiana and the Mid-Continent, respectively. In addition, on October 8, 2020,
the Company completed the sale of Blue Mountain Midstream (the "Blue Mountain
Divestiture"). See Note 3 for additional information about divestitures.

On October 12, 2020, the Board of Directors of the Company (the "Board"),
approved the dissolution, winding up and liquidation of the Company (the "Plan
of Liquidation") and adopted the Plan of Liquidation. Also, on October 12, 2020,
the required percentage of the Company's shareholders approved, through written
consent in accordance with the bylaws of the Company, the Plan of
Liquidation. The Plan of Liquidation contemplates the orderly sale of the
Company's remaining assets and the discharge of all outstanding liabilities to
third parties and, after the establishment of appropriate reserves, the
distribution of any remaining cash to shareholders. The Company intends to file
a certificate of dissolution with the State of Delaware, at which time the
Company's transfer books and records will be closed and the Company's common
stock will cease trading on the OTCQX Market, no later than the close of
business on December 31, 2020. The Company does not anticipate that it will be
required to file an Annual Report on Form 10-K for the year ended December 31,
2020. See Note 18 for more information.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



Results of Operations

Substantially all of the revenues reported on the Company's unaudited condensed
consolidated statements of operations included herein relates to properties that
were divested either prior or subsequent to September 30, 2020. See Note 3 for
information about divestitures. Due to the adoption of the Plan of Liquidation,
the Company's results of operations for the three months and nine months ended
September 30, 2020, are not indicative of its future results. See Note 18 for
information about the Company's Plan of Liquidation.

For the three months ended September 30, 2020, the Company's results included the following:

• oil, natural gas and NGL sales of approximately $7 million compared to $51

million for the three months ended September 30, 2019;

• average daily production of approximately 35 MMcfe/d compared to 242 MMcfe/d

for the three months ended September 30, 2019;

• net loss of approximately $236 million compared to $226 million for the

three months ended September 30, 2019;

• impairment charges of approximately $220 million compared to $95 million for

the three months ended September 30, 2019;

• capital expenditures of approximately $5 million compared to $39 million for

the three months ended September 30, 2019; and

• no wells drilled compared to 14 wells drilled (all successful) for the three

months ended September 30, 2019.

For the nine months ended September 30, 2020, the Company's results included the following:

• oil, natural gas and NGL sales of approximately $33 million compared to $194

million for the nine months ended September 30, 2019;

• average daily production of approximately 53 MMcfe/d compared to 264 MMcfe/d

for the nine months ended September 30, 2019;

• net loss of approximately $359 million compared to $220 million for the nine

months ended September 30, 2019;

• impairment charges of approximately $341 million compared to $113 million

for the nine months ended September 30, 2019;

• capital expenditures of approximately $19 million compared to $141 million


      for the nine months ended September 30, 2019; and


   •  11 wells drilled (10 successful) compared to 49 wells drilled (all
      successful) for the nine months ended September 30, 2019.

Divestitures - 2020



On January 15, 2020, the Company completed the sale of its interest in
non-operated properties located in the Drunkards Wash field in the Uinta Basin
(the "Drunkards Wash Asset Sale"). Cash proceeds from the sale of these
properties were approximately $4 million (including a deposit of approximately
$450,000 received in 2019), and the Company recorded a net gain of approximately
$1 million.

On January 31, 2020, the Company completed the sale of its interest in properties located in the Overton field in East Texas (the "Overton Assets Sale"). Cash proceeds from the sale of these properties were approximately $17 million (including a deposit of approximately $2 million received in 2019).

On February 14, 2020, the Company completed the sale of its interest in properties located in the Personville field in East Texas (the "Personville Assets Sale"). Cash proceeds from the sale of these properties were approximately $28 million (including a deposit of approximately $3 million received in 2019).

On February 28, 2020, the Company completed the sale of its office building located in Oklahoma City, Oklahoma. Cash proceeds from the sale were approximately $21 million.

On April 2, 2020, the Company completed the sale of its remaining interest in properties located in East Texas. Cash proceeds from the sale of these properties were approximately $392,000.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



On September 1, 2020, the Company completed the sale of its interest in
substantially all of its properties located in North Louisiana (the "North
Louisiana Assets"). Cash proceeds from the sale of these properties were
approximately $23 million and the Company recorded a net loss of approximately
$1 million. The Company recorded a noncash impairment charge of approximately
$12 million to reduce the carrying value of these assets to fair value in the
second quarter of 2020.

Divestitures - Subsequent Events



On October 1, 2020, the Company completed the sale of its interest in
substantially all of its Mid-Continent properties located in Oklahoma (the
"Mid-Continent Assets"). Cash proceeds from the sale of these properties were
approximately $13 million (including a deposit of approximately $2 million
received in the third quarter of 2020) and the Company expects to record a net
gain of approximately $16 million in the fourth quarter of 2020. The Company
recognized pre-tax income of approximately $3 million and pre-tax loss of $86
million for the three months and nine months ended September 30, 2020,
respectively, and pre-tax income of approximately $2 million and $8 million for
the three months and nine months ended September 30, 2019, respectively, from
the Mid-Continent Assets.

On October 8, 2020, the Company completed the Blue Mountain Divestiture. Cash
proceeds from the sale were approximately $114 million (including a deposit of
approximately $11 million received in the third quarter of 2020). The Company
repaid approximately $80 million, representing total borrowings under the Blue
Mountain Midstream senior secured revolving loan facility (the "Blue Mountain
Credit Facility"), with a portion of the proceeds. The Company recorded
impairment charges of approximately $220 million and $237 million, primarily to
reduce the carrying value of assets to fair value, in the three months and nine
months ended September 30, 2020, respectively. The Company recognized pre-tax
loss of approximately $218 million and $231 million for the three months and
nine months ended September 30, 2020, respectively, and pre-tax loss of
approximately $3 million and $6 million for the three months and nine months
ended September 30, 2019, respectively, from Blue Mountain Midstream.

The Blue Mountain Divestiture and the Mid-Continent Assets are not presented as
discontinued operations as of and for the period ended September 30, 2020, the
associated activity represents substantially all of the Company's results of
operations and remaining net assets. Therefore, they do not meet the definition
of a component of an entity because they are not clearly distinguishable from
the rest of the entity.

Divestitures - 2019

On November 22, 2019, the Company completed the sale of its interest in
properties located in the Hugoton Basin (the "Hugoton Basin Assets Sale"). Cash
proceeds from the sale of these properties were approximately $286 million. In
connection with the Hugoton Basin Assets Sale, the buyer also acquired the
Company's interest in Mayzure, LLC ("Mayzure"), a wholly owned subsidiary of the
Company, which was the counterparty to the volumetric production payment
agreements based on helium produced from certain oil and natural gas properties
in the Hugoton Basin. The Company recorded a noncash impairment charge of
approximately $95 million to reduce the carrying value of these assets to fair
value. The Company recognized pre-tax loss of approximately $98 million and $89
million for the three months and nine months ended September 30, 2019,
respectively, from the Hugoton Basin.

On September 5, 2019, the Company completed the sale of its interest in properties located in Illinois. Cash proceeds from the sale of these properties were approximately $4 million and the Company recorded a net gain of approximately $4 million.



On August 30, 2019, the Company completed the sale of its interest in non-core
assets located in North Louisiana. Cash proceeds from the sale were
approximately $2 million and the Company recorded a net gain of approximately
$376,000.

On July 3, 2019, the Company completed the sale of its interest in properties
located in Michigan. Cash proceeds from the sale of these properties were
approximately $39 million. The Company recorded a noncash impairment charge of
approximately $18 million to reduce the carrying value of these assets to fair
value.

On May 31, 2019, the Company completed the sale of its interest in non-operated
properties located in the Hugoton Basin in Kansas. Cash proceeds from the sale
of these properties were approximately $29 million and the Company recorded a
net loss of approximately $10 million.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



On January 17, 2019, the Company completed the sale of its interest in
properties located in the Arkoma Basin in Oklahoma. Cash proceeds from the sale
of these properties were approximately $64 million (including a deposit of
approximately $5 million received in 2018), and the Company recorded a net gain
of approximately $28 million.

Impact of Decline in Commodity Prices



The Company and the oil and gas industry have been adversely impacted by certain
events, including the initial dramatic increase in output from OPEC+ in the
first quarter of 2020 and the destruction of demand resulting from the
unprecedented global health and economic crisis sparked by the COVID-19 global
pandemic. In order to reduce expenses, in April 2020, the Board made the
decision to consolidate the management of Blue Mountain Midstream within the
Company's existing executive management team and further reduced expenses by
integration of the operations of the two companies wherever practical. The
Company incurred severance expenses of approximately $10 million and $15 million
for the three months and nine months ended September 30, 2020, respectively, in
connection with integration activities, divestitures and the Plan of
Liquidation. The Company expects to incur expenses of approximately $2 million
in the fourth quarter of 2020 for share-based compensation and severance
termination benefits. See Note 3 for information about divestitures, Note 12 for
information about share-based compensation and Note 18 for information about the
Company's Plan of Liquidation.

Impairment of Assets Held for Sale and Long-Lived Assets



During the three months and nine months ended September 30, 2020, the Company
recorded impairment charges of approximately $220 million and $341 million,
respectively. The impairment charges recorded in the three months ended
September 30, 2020, were primarily triggered by the Company's exit from the
midstream business, with the fair value being predominantly driven by the
contract price of the Blue Mountain Divestiture. The impairment charges recorded
in the first quarter and second quarter of 2020 were primarily due to declines
in commodity prices and declines in expected future volumes. See Note 1 for
additional information about impairment.

2020 Oil and Natural Gas and Midstream Capital Budget

For 2020, the Company estimates its total capital expenditures, excluding acquisitions, will be approximately $19 million, including approximately $2 million related to its oil and natural gas capital program and approximately $17 million related to Blue Mountain Midstream. Future capital expenditures are expected to be minimal due to the Company's Plan of Liquidation.

Impact of COVID-19 Pandemic



Certain remote work arrangements implemented by the Company in response to the
COVID-19 pandemic have not adversely affected its ability to maintain
operations, including financial reporting systems, internal control over
financial reporting and disclosure controls and procedures. However, the
COVID-19 pandemic continues to evolve and identification of all trends, events
and uncertainties, including a possible widespread resurgence in COVID-19
infections in the remainder of 2020 without the availability of generally
effective therapeutics or a vaccine for the disease, that may impact the
Company's financial condition and results of operations are unknown at this
time. Due to the adoption of the Plan of Liquidation, the Company's results of
operations for the three months and nine months ended September 30, 2020, are
not indicative of its future results.

Financing Activities

CARES Act



The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") that
was enacted March 27, 2020, includes measures to assist companies. The Company
has not received any funding under the CARES Act or other federal programs to
support operations and does not anticipate that it will.

Riviera Credit Facility



As of September 30, 2020, Riviera's credit agreement provided for a senior
secured reserve-based revolving loan facility (the "Riviera Credit Facility")
with a borrowing base and borrowing commitments of $7 million. During the nine
months ended September 30, 2020, the Company recorded a finance fee expense of
approximately $468,000 related to the write-off of a portion of unamortized
deferred financing fees due to a reduction of the Riviera Credit Facility
borrowing base. On October 27, 2020, the Company entered into a Sixth Amendment
(the "Sixth Amendment") to the Riviera Credit Facility. Pursuant to the Sixth
Amendment, the borrowing base was reduced to $540,000, the lenders obligations
to make any loans,

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



were eliminated and the Company's ability to make any borrowing requests was
removed. In addition, the Company is required to maintain a cash deposit of at
least $540,000 with a lender bank related to letter of credit commitments. The
Company anticipates the Riviera Credit Facility will be terminated in the fourth
quarter of 2020. See Note 6.

Blue Mountain Midstream Credit Facility



As of September 30, 2020, the Blue Mountain Credit Facility had a borrowing base
and borrowing commitments of $200 million. The Blue Mountain Credit Facility
together with the Riviera Credit Facility, are referred to as the "Credit
Facilities"). On October 8, 2020, the Company repaid approximately $80 million,
representing total borrowings under the Blue Mountain Credit Facility, with a
portion of the net proceeds from the Blue Mountain Divestiture. Subsequently,
the Blue Mountain Credit Facility was terminated effective October 8, 2020. See
Note 6.

Share Repurchase Program

On July 18, 2019, the Board authorized the repurchase of up to $150 million of
the Company's outstanding shares of common stock. During the nine months ended
September 30, 2020, the Company repurchased an aggregate of 282,742 shares of
common stock at an average price of $7.31 per share for a total cost of
approximately $2 million. Future share repurchases are not provided for under
the Company's Plan of Liquidation.

Cash Distributions



On March 9, 2020, the Board declared a cash distribution of $1.00 per share. A
cash distribution totaling approximately $58 million was paid on April 22, 2020,
to shareholders of record as of the close of business on April 8, 2020. On
April 23, 2020, the Board declared a cash distribution of $0.75 per share. The
distribution totaling approximately $43 million was paid on May 11, 2020, to
shareholders of record as of the close of business on May 7, 2020. In addition,
approximately $1 million and $11 million for potential future distributions
related to nonvested share-based compensation awards was voluntarily recorded in
restricted cash at September 30, 2020, and December 31, 2019, respectively.

Cash Distributions - Subsequent Event

On October 12, 2020, the Board declared a cash distribution of $1.35 per share. A cash distribution totaling approximately $78 million was paid on October 28, 2020, to shareholders of record as of the close of business on October 23, 2020.

Commodity Derivatives



During the three months ended September 30, 2020, the Company unwound all of its
natural gas fixed price swaps, oil fixed price swaps, and Panhandle Eastern
Pipeline ("PEPL") basis swaps for 2020 and 2021, for a cost of approximately
$356,000.

Field Level Cash Flow

To assess the performance of the Company's reporting segments, the Company's
Chief Operating Decision Maker ("CODM") analyzes field level cash flow, a
non-generally accepted accounting principles financial metric. The Company
defines field level cash flow as revenues less direct operating expenses. Other
indirect income (expenses) include "general and administrative expenses,"
"exploration costs," "depreciation, depletion and amortization," "(gains) on
sale of assets and other, net," "impairment of long-lived assets," "other income
and (expenses)" and "reorganization items, net." Field level cash flow is
disclosed herein to provide financial information about the Company's reporting
segments in alignment with the information reviewed by its CODM. Information
regarding total assets by reporting segment is not presented because it is not
reviewed by the CODM.

During the first quarter of 2020, the definition of field level cash flow analyzed by the Company's CODM was revised to report within segment results, expenses previously reported as unallocated to segment results. Information presented for the prior period has been recast to conform to current presentation.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



Results of Operations

Three Months Ended September 30, 2020, Compared to Three Months Ended
September 30, 2019



                                              Three Months Ended September 30,
                                                 2020                   2019             Variance
                                                                (in thousands)
Revenues and other:
Natural gas sales                          $          3,796       $         33,082     $    (29,286 )
Oil sales                                             2,844                 10,575           (7,731 )
NGL sales                                               700                  7,372           (6,672 )
Total oil, natural gas and NGL sales                  7,340                 51,029          (43,689 )
Gains (losses) on commodity derivatives              (2,948 )                5,665           (8,613 )
Marketing and other revenues                         29,083                 51,360          (22,277 )
                                                     33,475                108,054          (74,579 )
Expenses:
Lease operating expenses                              2,367                 18,307          (15,940 )
Transportation expenses                                 818                 16,275          (15,457 )
Marketing expenses                                   20,284                 37,688          (17,404 )
General and administrative expenses (1)              16,871                 16,954              (83 )
Exploration costs                                       413                  1,947           (1,534 )
Depreciation, depletion and amortization              3,915                 20,060          (16,145 )
Impairment of assets held for sale and
long-lived assets                                   219,606                 95,080          124,526
Taxes, other than income taxes                          846                  5,111           (4,265 )
(Gains) losses on sale of assets and
other, net                                            3,515                 (7,587 )         11,102
                                                    268,635                203,835           64,800
Other income and (expenses)                          (1,009 )               (2,924 )          1,915
Reorganization items, net                              (210 )                 (284 )             74
Loss before income taxes                           (236,379 )              (98,989 )       (137,390 )
Income tax expense                                        -                126,646         (126,646 )
Net loss                                   $       (236,379 )     $       (225,635 )   $    (10,744 )

(1) General and administrative expenses for the three months ended September 30,

2020, and September 30, 2019, include approximately $392,000 and $3 million,

respectively, of share-based compensation expenses. In addition, general and

administrative expenses for the three months ended September 30, 2020, and

September 30, 2019, include approximately $10 million and $2 million,
    respectively, of severance costs.



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Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued

                                               Three Months Ended September 30,
                                                 2020                     2019             Variance
Average daily production:
Natural gas (MMcf/d)                                     26                      194               (87 %)
Oil (MBbls/d)                                           0.8                      2.1               (62 %)
NGL (MBbls/d)                                           0.8                      6.0               (87 %)
Total (MMcfe/d)                                          35                      242               (86 %)

Weighted average prices: (1)
Natural gas (Mcf)                          $           1.59         $           1.86               (15 %)
Oil (Bbl)                                  $          39.49         $          55.13               (28 %)
NGL (Bbl)                                  $           9.43         $          13.40               (30 %)

Average NYMEX prices:
Natural gas (MMBtu)                        $           1.98         $           2.23               (11 %)
Oil (Bbl)                                  $          40.93         $          55.45               (26 %)

Costs per Mcfe of production:
Lease operating expenses                   $           0.73         $           0.82               (11 %)
Transportation expenses                    $           0.25         $           0.73               (66 %)
General and administrative expenses (2)    $           5.17         $           0.76               580 %
Depreciation, depletion and amortization   $           1.20         $           0.90                33 %
Taxes, other than income taxes             $           0.26         $           0.23                13 %

(1) Does not include the effect of gains (losses) on derivatives.

(2) General and administrative expenses for the three months ended September 30,

2020, and September 30, 2019, include approximately $392,000 and $3 million,

respectively, of share-based compensation expenses. In addition, general and

administrative expenses for the three months ended September 30, 2020, and

September 30, 2019, include approximately $10 million and $2 million,
    respectively, of severance costs.



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Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued

Upstream Reporting Segment



                                      Three Months Ended September 30,
                                       2020                     2019            Variance
                                                      (in thousands)

Oil, natural gas and NGL sales $ 7,340 $ 51,029

$ (43,689 )
Marketing and other revenues                  142                    16,627       (16,485 )
                                            7,482                    67,656       (60,174 )

Lease operating expenses                    2,367                    18,307       (15,940 )
Transportation expenses                       818                    16,275       (15,457 )
Marketing expenses                              6                     7,948        (7,942 )
Taxes, other than income taxes                421                     4,468        (4,047 )
Total direct operating expenses             3,612                    46,998       (43,386 )
Field level cash flow (1)         $         3,870         $          20,658     $ (16,788 )

(1) Refer to Note 17 for a reconciliation of field level cash flow to loss before

income taxes.

Oil, Natural Gas and NGL Sales



Oil, natural gas and NGL sales decreased by approximately $44 million or 86% to
approximately $7 million for the three months ended September 30, 2020, from
approximately $51 million for the three months ended September 30, 2019,
primarily due to lower natural gas and NGL volumes as a result of divestitures
completed in 2019 and 2020 and lower commodity prices. Lower natural gas and oil
prices resulted in a decrease in revenues of approximately $1 million and $1
million, respectively.

Average daily production volumes decreased to approximately 35 MMcfe/d for the
three months ended September 30, 2020, from 242 MMcfe/d for the three months
ended September 30, 2019. Lower natural gas, NGL and oil production volumes
resulted in a decrease in revenues of approximately $29 million, $6 million and
$7 million, respectively.

The following table sets forth average daily production by region:





                                           Three Months Ended September 30,
                                           2020                      2019                  Variance
Average daily production (MMcfe/d):
Hugoton Basin                                      -                        106           (106 )      (100 %)
Mid-Continent                                     24                         42            (18 )       (43 %)
East Texas                                         -                         40            (40 )      (100 %)
North Louisiana                                   11                         35            (24 )       (69 %)
Uinta Basin                                        -                         17            (17 )      (100 %)
Michigan/Illinois                                  -                          2             (2 )      (100 %)
                                                  35                        242           (207 )       (86 %)




The decrease in average daily production in the Mid-Continent operating region
primarily reflects a reduction in production due to reduced development drilling
and natural decline of 2019 drilling programs. The decrease in average daily
production in North Louisiana primarily reflects those same characteristics,
coupled with plant downtime and the Company's divestiture of interests in
properties in this region during the third quarter of 2020. The decrease in
average daily production volumes in the Uinta Basin and East Texas operating
regions primarily reflect lower production volumes as a result of divestitures
completed during 2020. In addition, the Company completed the divestiture of all
of its interests in properties located in the Hugoton Basin and
Michigan/Illinois operating regions during 2019. See Note 3 for additional
information about divestitures.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Marketing and Other Revenues



                               Three Months Ended September 30,
                               2020                    2019             Variance
                                               (in thousands)

Jayhawk plant and helium   $          1         $            14,751     $ (14,750 )
Other                               141                       1,876        (1,735 )
                           $        142         $            16,627     $ (16,485 )




Marketing and other revenues decreased by approximately $17 million or 99% to
approximately $142,000 for the three months ended September 30, 2020, from
approximately $17 million for the three months ended September 30, 2019. The
decrease was primarily due to the Hugoton Basin Assets Sale, which included sale
of the Jayhawk plant. Other primarily includes revenues from other midstream
systems in the East Texas and North Louisiana operating regions, which were
divested in 2020.

Lease Operating Expenses



Lease operating expenses include expenses such as labor, field office, vehicle,
supervision, maintenance, tools and supplies, and workover expenses. Lease
operating expenses decreased by approximately $16 million or 87% to
approximately $2 million for the three months ended September 30, 2020, from
approximately $18 million for the three months ended September 30, 2019. The
decrease was primarily due to divestitures completed in 2019 and 2020 and lower
service costs. Lease operating expenses per Mcfe decreased to $0.73 per Mcfe for
the three months ended September 30, 2020, from $0.82 per Mcfe for the three
months ended September 30, 2019, primarily driven by changes in the Company's
asset base as a result of divestitures.

Transportation Expenses



Transportation expenses decreased by approximately $15 million or 95% to
approximately $1 million for the three months ended September 30, 2020, from
approximately $16 million for the three months ended September 30, 2019. The
decrease was primarily due to divestitures completed in 2019 and
2020. Transportation expenses per Mcfe decreased to $0.25 per Mcfe for the three
months ended September 30, 2020, from $0.73 per Mcfe for the three months ended
September 30, 2019, primarily driven by changes in the Company's asset base as a
result of divestitures.

Marketing Expenses



                    Three Months Ended September 30,
                  2020                      2019              Variance
                                    (in thousands)

Jayhawk plant   $       -           $               7,255     $  (7,255 )
Other                   6                             693          (687 )
                $       6           $               7,948     $  (7,942 )




Marketing expenses represent third-party activities associated with
company-owned gathering systems, plants and facilities. Marketing expenses
decreased by approximately $8 million or 100% to approximately $6,000 for the
three months ended September 30, 2020, from approximately $8 million for the
three months ended September 30, 2019. The decrease was primarily due to the
Hugoton Basin Assets Sale, which included sale of the Jayhawk plant.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Taxes, Other Than Income Taxes



                      Three Months Ended September 30,
                       2020                    2019            Variance
                                      (in thousands)

Severance taxes    $        335         $            1,475     $  (1,140 )
Ad valorem taxes             40                      2,938        (2,898 )
Other taxes                  46                         55            (9 )
                   $        421         $            4,468     $  (4,047 )


Severance taxes, which are a function of revenues generated from production,
decreased primarily due to lower production volumes due to divestitures
completed in 2019 and 2020. Ad valorem taxes, which are based on the value of
reserves and production equipment and vary by location, decreased primarily due
to divestitures completed in 2019 and 2020.

Field Level Cash Flow



Field level cash flow decreased by approximately $17 million or 81% to
approximately $4 million for the three months ended September 30, 2020, from
approximately $21 million for the three months ended September 30, 2019. The
decrease was primarily due to divestitures completed in 2019 and 2020 and lower
commodity prices.

Blue Mountain Reporting Segment





                                    Three Months Ended September 30,
                                       2020                  2019           Variance
                                                    (in thousands)

Marketing revenues                $        28,941       $        34,733     $  (5,792 )

Marketing expenses                         20,278                29,740        (9,462 )
Taxes, other than income taxes                425                   643          (218 )
Total direct operating expenses            20,703                30,383        (9,680 )
Field level cash flow (1)         $         8,238       $         4,350     $   3,888

(1) Refer to Note 17 for a reconciliation of field level cash flow to loss before


    income taxes.


Marketing Revenues

Marketing revenues decreased by approximately $6 million or 17% to approximately
$29 million for the three months ended September 30, 2020, from approximately
$35 million for the three months ended September 30, 2019. The decrease was
primarily due to lower commodity prices and lower volumes. Average daily
throughput volumes decreased to approximately 105 MMcf/d for the three months
ended September 30, 2020, from 114 MMcf/d for the three months ended
September 30, 2019.

Marketing Expenses



Marketing expenses decreased by approximately $10 million or 32% to
approximately $20 million for the three months ended September 30, 2020, from
approximately $30 million for the three months ended September 30, 2019. The
decrease was primarily due to lower commodity prices and lower volumes.

Field Level Cash Flow

Field level cash flow increased by approximately $4 million or 89% to approximately $8 million for the three months ended September 30, 2020, from approximately $4 million for the three months ended September 30, 2019, primarily due to lower expenses.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



Indirect Income and Expenses

Gains (Losses) on Commodity Derivatives



Losses on commodity derivatives were approximately $3 million for the three
months ended September 30, 2020, compared to gains of approximately $6 million
for the three months ended September 30, 2019. Gains and losses on commodity
derivatives were primarily due to changes in fair value of the derivative
contracts. The fair value on unsettled derivative contracts changes as future
commodity price expectations change compared to the contract prices on the
derivatives. If the expected future commodity prices increase compared to the
contract prices on the derivatives, losses are recognized; and if the expected
future commodity prices decrease compared to the contract prices on the
derivatives, gains are recognized. During the three months ended September 30,
2020, the Company unwound all of its natural gas fixed price swaps, oil fixed
price swaps, and Panhandle Eastern Pipeline basis swaps for 2020 and 2021, for a
cost of approximately $356,000. As of September 30, 2020, the Company had no
derivative positions.

General and Administrative Expenses



General and administrative expenses are costs not directly associated with field
operations and reflect the costs of employees including executive officers,
related benefits, office leases and professional fees. General and
administrative expenses were approximately $17 million for both the three months
ended September 30, 2020, and September 30, 2019. Increased severance expenses
were offset primarily by lower share-based compensation expenses and lower
salaries and benefits related expenses resulting from lower headcount. Severance
expenses were approximately $10 million for the three months ended September 30,
2020, compared to $2 million for the three months ended September 30,
2019. General and administrative expenses per Mcfe increased to $5.17 per Mcfe
for the three months ended September 30, 2020, from $0.76 per Mcfe for the three
months ended September 30, 2019, due to lower production volumes associated with
divestitures and increased severance expenses.

Exploration Costs

Exploration costs were approximately $413,000 for the three months ended September 30, 2020, compared to $2 million for the three months ended September 30, 2019.

Depreciation, Depletion and Amortization



Depreciation, depletion and amortization decreased by approximately $16 million
or 80% to approximately $4 million for the three months ended September 30,
2020, from approximately $20 million for the three months ended September 30,
2019. Depreciation, depletion and amortization per Mcfe increased to $1.20 per
Mcfe for the three months ended September 30, 2020, from $0.90 per Mcfe for the
three months ended September 30, 2019.

Impairment of Assets Held for Sale and Long-Lived Assets



During the three months ended September 30, 2020, the Company recorded
impairment charges of approximately $220 million, primarily to reduce the
carrying value of Blue Mountain Midstream's assets to fair value. The impairment
charges were primarily triggered by the Company's exit from the midstream
business, with the fair value being predominantly driven by the contract price
of the Blue Mountain Divestiture. During the three months ended September 30,
2019, the Company recorded a noncash impairment charge of approximately $95
million related to divested oil and natural gas properties located in the
Hugoton Basin. The impairment charge was primarily due to a decline in commodity
prices. See Note 1 for additional information about impairment and Note 3 for
information about divestitures.

(Gains) Losses on Sale of Assets and Other, Net



During the three months ended September 30, 2020, the Company recorded a net
loss of approximately $4 million, including bad debt expense of approximately $2
million, a net loss of approximately $1 million on the sale of North Louisiana
Assets and net losses from other divestitures. During the three months ended
September 30, 2019, the Company recorded a net gain of approximately $8 million,
primarily related to divestitures. See Note 3 for information about
divestitures.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued

Other Income and (Expenses)

                                                 Three Months Ended September 30,
                                                    2020                  2019             Variance
                                                                   (in thousands)

Interest expense, net of amounts capitalized $ (700 ) $


  (2,329 )   $       1,629
Other, net                                                (309 )                (595 )             286
                                               $        (1,009 )     $        (2,924 )   $       1,915


Interest expense decreased primarily due to lower outstanding debt during the
three months ended September 30, 2020, compared to the same period of the prior
year. For the three months ended September 30, 2020, "other, net" is primarily
related to commitment fees for the undrawn portion of the Credit Facilities. For
the three months ended September 30, 2019, "other, net" is primarily related to
write off of a portion of unamortized deferred financing fees of approximately
$700,000 and commitment fees for the undrawn portion of the Credit Facilities,
partially offset by interest and rental income. See "Debt" under "Liquidity and
Capital Resources" below for additional details.

Reorganization Items, Net



Reorganization items represent costs directly associated with Chapter 11
proceedings since the petition date. During the three months ended September 30,
2020, and September 30, 2019, reorganization items were approximately $210,000
and $284,000, respectively, primarily related to legal and other professional
fees.

Income Tax Expense

The Company recognized no income tax expense for the three months ended
September 30, 2020, because of a full valuation allowance recorded in the third
quarter of 2019, compared to income tax expense of approximately $127 million
for the three months ended September 30, 2019. During the third quarter of 2019,
and for the first time since Riviera's inception, the Company's earnings were a
cumulative loss, primarily due to losses generated during 2019. Based on the
cumulative loss and projections of future taxable loss for the periods in which
deferred tax assets are deductible, the Company recorded a full valuation
allowance against all of its deferred tax assets.

Net Loss



A net loss of approximately $236 million was incurred for the three months ended
September 30, 2020, compared to approximately $226 million for the three months
ended September 30, 2019. See discussion above for explanations of variances.



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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



Results of Operations

Nine Months Ended September 30, 2020, Compared to Nine Months Ended
September 30, 2019



                                               Nine Months Ended September 30,
                                                 2020                   2019             Variance
                                                                (in thousands)
Revenues and other:
Natural gas sales                          $         18,695       $        136,823     $   (118,128 )
Oil sales                                            11,424                 26,525          (15,101 )
NGL sales                                             2,953                 30,783          (27,830 )
Total oil, natural gas and NGL sales                 33,072                194,131         (161,059 )
Gains on commodity derivatives                        3,773                 12,673           (8,900 )
Marketing and other revenues                         84,909                183,254          (98,345 )
                                                    121,754                390,058         (268,304 )
Expenses:
Lease operating expenses                             10,212                 66,204          (55,992 )
Transportation expenses                               4,201                 53,478          (49,277 )
Marketing expenses                                   58,431                132,888          (74,457 )
General and administrative expenses (1)              37,994                 49,434          (11,440 )
Exploration costs                                       413                  4,154           (3,741 )
Depreciation, depletion and amortization             19,027                 65,013          (45,986 )
Impairment of assets held for sale and
long-lived assets                                   341,264                113,470          227,794
Taxes, other than income taxes                        3,436                 14,010          (10,574 )
(Gains) losses on sale of assets and
other, net                                            1,484                (24,967 )         26,451
                                                    476,462                473,684            2,778
Other income and (expenses)                          (3,685 )               (6,111 )          2,426
Reorganization items, net                              (704 )                 (756 )             52
Loss before income taxes                           (359,097 )              (90,493 )       (268,604 )
Income tax expense                                        -                129,092         (129,092 )
Net loss                                   $       (359,097 )     $       (219,585 )   $   (139,512 )

(1) General and administrative expenses for the nine months ended September 30,

2020, and September 30, 2019, include approximately $(3) million and $13

million, respectively, of share-based compensation expenses. In addition,

general and administrative expenses for the nine months ended September 30,


    2020, and September 30, 2019, include approximately $15 million and $2
    million, respectively, of severance costs.



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Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued

                                                Nine Months Ended September 30,
                                                 2020                     2019             Variance
Average daily production:
Natural gas (MMcf/d)                                     41                      215               (81 %)
Oil (MBbls/d)                                           1.1                      1.7               (35 %)
NGL (MBbls/d)                                           1.0                      6.4               (84 %)
Total (MMcfe/d)                                          53                      264               (80 %)

Weighted average prices: (1)
Natural gas (Mcf)                          $           1.66         $           2.33               (29 %)
Oil (Bbl)                                  $          39.44         $          55.80               (29 %)
NGL (Bbl)                                  $          11.25         $          17.55               (36 %)

Average NYMEX prices:
Natural gas (MMBtu)                        $           1.88         $           2.67               (30 %)
Oil (Bbl)                                  $          38.32         $          56.72               (32 %)

Costs per Mcfe of production:
Lease operating expenses                   $           0.70         $           0.92               (24 %)
Transportation expenses                    $           0.29         $           0.74               (61 %)
General and administrative expenses (2)    $           2.61         $           0.69               278 %
Depreciation, depletion and amortization   $           1.31         $           0.90                46 %
Taxes, other than income taxes             $           0.24         $           0.19                26 %

(1) Does not include the effect of gains (losses) on derivatives.

(2) General and administrative expenses for the nine months ended September 30,

2020, and September 30, 2019, include approximately $(3) million and $13

million, respectively, of share-based compensation expenses. In addition,

general and administrative expenses for the nine months ended September 30,


    2020, and September 30, 2019, include approximately $15 million and $2
    million, respectively, of severance costs.



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Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued

Upstream Reporting Segment



                                     Nine Months Ended September 30,
                                       2020                  2019            Variance
                                                     (in thousands)

Oil, natural gas and NGL sales    $       33,072       $        194,131     $ (161,059 )
Marketing and other revenues               2,880                 63,549        (60,669 )
                                          35,952                257,680       (221,728 )

Lease operating expenses                  10,212                 66,204        (55,992 )
Transportation expenses                    4,201                 53,478        (49,277 )
Marketing expenses                            70                 35,568        (35,498 )
Taxes, other than income taxes             2,142                 11,984         (9,842 )
Total direct operating expenses           16,625                167,234       (150,609 )
Field level cash flow (1)         $       19,327       $         90,446     $  (71,119 )

(1) Refer to Note 17 for a reconciliation of field level cash flow to loss before

income taxes.

Oil, Natural Gas and NGL Sales



Oil, natural gas and NGL sales decreased by approximately $161 million or 83% to
approximately $33 million for the nine months ended September 30, 2020, from
approximately $194 million for the nine months ended September 30, 2019,
primarily due to lower production volumes as a result of divestitures completed
in 2019 and 2020 and lower commodity prices. Lower natural gas, NGL and oil
prices resulted in a decrease in revenues of approximately $7 million, $2
million and $5 million, respectively.

Average daily production volumes decreased to approximately 53 MMcfe/d for the
nine months ended September 30, 2020, from 264 MMcfe/d for the nine months ended
September 30, 2019. Lower natural gas, NGL and oil production volumes resulted
in a decrease in revenues of approximately $111 million, $26 million and $10
million, respectively.

The following table sets forth average daily production by region:





                                           Nine Months Ended September 30,
                                           2020                      2019                  Variance
Average daily production (MMcfe/d):
Hugoton Basin                                      -                        114           (114 )      (100 %)
Mid-Continent                                     30                         38             (8 )       (21 %)
East Texas                                         6                         43            (37 )       (86 %)
North Louisiana                                   16                         32            (16 )       (50 %)
Uinta Basin                                        1                         18            (17 )       (94 %)
Michigan/Illinois                                  -                         19            (19 )      (100 %)
                                                  53                        264           (211 )       (80 %)




Production volumes in the Mid-Continent were consistent with the comparable
period of the prior year. The decrease in average daily production in North
Louisiana primarily reflects a reduction in production due to reduced
development drilling and natural decline of 2019 drilling programs, plant
downtime, and the Company's divestiture of interests in properties in this
region during 2020 and 2019. The decreases in average daily production volumes
in the Uinta Basin and East Texas operating regions primarily reflect lower
production volumes as a result of divestitures completed during 2020. In
addition, the Company completed the divestiture of all of its interests in
properties located in the Hugoton Basin and Michigan/Illinois operating regions
during 2019. See Note 3 for additional information about divestitures.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Marketing and Other Revenues



                                Nine Months Ended September 30,
                                2020                     2019            Variance
                                               (in thousands)

Jayhawk plant and helium   $            17         $          58,061     $ (58,044 )
Other                                2,863                     5,488        (2,625 )
                           $         2,880         $          63,549     $ (60,669 )




Marketing and other revenues decreased by approximately $61 million or 95% to
approximately $3 million for the nine months ended September 30, 2020, from
approximately $64 million for the nine months ended September 30, 2019. The
decrease was primarily due to the Hugoton Basin Assets Sale, which included sale
of the Jayhawk plant. Other primarily includes revenues from other midstream
systems in the East Texas and North Louisiana operating regions, which were
divested in 2020.

Lease Operating Expenses



Lease operating expenses include expenses such as labor, field office, vehicle,
supervision, maintenance, tools and supplies, and workover expenses. Lease
operating expenses decreased by approximately $56 million or 85% to
approximately $10 million for the nine months ended September 30, 2020, from
approximately $66 million for the nine months ended September 30, 2019. The
decrease was primarily due to divestitures completed in 2019 and 2020 and lower
service costs. Lease operating expenses per Mcfe decreased to $0.70 per Mcfe for
the nine months ended September 30, 2020, from $0.92 per Mcfe for the nine
months ended September 30, 2019.

Transportation Expenses



Transportation expenses decreased by approximately $49 million or 92% to
approximately $4 million for the nine months ended September 30, 2020, from
approximately $53 million for the nine months ended September 30,
2019. Transportation expenses per Mcfe decreased to $0.29 per Mcfe for the nine
months ended September 30, 2020, from $0.74 per Mcfe for the nine months ended
September 30, 2019, primarily driven by changes in the Company's asset base as a
result of divestitures.

Marketing Expenses



                    Nine Months Ended September 30,
                    2020                     2019            Variance
                                    (in thousands)

Jayhawk plant   $        (120 )       $           33,446     $ (33,566 )
Other                     190                      2,122        (1,932 )
                $          70         $           35,568     $ (35,498 )




Marketing expenses represent third-party activities associated with
company-owned gathering systems, plants and facilities. Marketing expenses
decreased by approximately $36 million or 100% to approximately $70,000 for the
nine months ended September 30, 2020, from approximately $36 million for the
nine months ended September 30, 2019. The decrease was primarily due to the
Hugoton Basin Assets Sale, which included sale of the Jayhawk plant and a credit
to expense from receipt of an electric co-op refund during the nine months ended
September 30, 2020.

Taxes, Other Than Income Taxes



                        Nine Months Ended September 30,
                        2020                     2019            Variance
                                       (in thousands)

Severance taxes    $         1,598         $           6,120     $  (4,522 )
Ad valorem taxes               151                     9,962        (9,811 )
Other taxes                    393                    (4,098 )       4,491
                   $         2,142         $          11,984     $  (9,842 )




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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued



Severance taxes, which are a function of revenues generated from production,
decreased primarily due to lower production volumes due to divestitures
completed in 2019 and 2020. Ad valorem taxes, which are based on the value of
reserves and production equipment and vary by location, decreased primarily due
to divestitures completed in 2019 and 2020. Other taxes include a sales tax
refund of approximately $4 million during the nine months ended September 30,
2019.

Field Level Cash Flow

Field level cash flow decreased by approximately $71 million or 79% to
approximately $19 million for the nine months ended September 30, 2020, from
approximately $90 million for the nine months ended September 30, 2019. The
decrease was primarily due to divestitures completed in 2019 and 2020 and lower
commodity prices.

Blue Mountain Reporting Segment





                                     Nine Months Ended September 30,
                                       2020                  2019           Variance
                                                    (in thousands)

Marketing revenues                $       82,029       $        119,705     $ (37,676 )

Marketing expenses                        58,361                 97,320       (38,959 )
Taxes, other than income taxes             1,294                  2,026          (732 )
Total direct operating expenses           59,655                 99,346       (39,691 )
Field level cash flow (1)         $       22,374       $         20,359     $   2,015

(1) Refer to Note 17 for a reconciliation of field level cash flow to loss before


    income taxes.


Marketing Revenues

Marketing revenues decreased by approximately $38 million or 31% to
approximately $82 million for the nine months ended September 30, 2020, from
approximately $120 million for the nine months ended September 30, 2019. The
decrease was primarily due to lower commodity prices, lower volumes, production
curtailments and contract disputes during 2020, partially offset by revenues
from the water service business beginning in the second quarter of 2019. Average
daily throughput volumes decreased to approximately 107 MMcf/d for the nine
months ended September 30, 2020, from 117 MMcf/d for the nine months ended
September 30, 2019.

Marketing Expenses



Marketing expenses decreased by approximately $39 million or 40% to
approximately $58 million for the nine months ended September 30, 2020, from
approximately $97 million for the nine months ended September 30, 2019. The
decrease was primarily due to lower commodity prices during 2020, partially
offset by expenses related to the water services business and higher marketing
expenses due to discounts on gathering fees offered to producers during 2020.

Field Level Cash Flow

Field level cash flow increased by approximately $2 million or 10% to approximately $22 million for the nine months ended September 30, 2020, from approximately $20 million for the nine months ended September 30, 2019, primarily due to lower expenses.

Indirect Income and Expenses

Gains on Commodity Derivatives



Gains on commodity derivatives were approximately $4 million and $13 million for
the nine months ended September 30, 2020, and the nine months ended
September 30, 2019, respectively. Gains on commodity derivatives were primarily
due to changes in fair value of the derivative contracts. The fair value on
unsettled derivative contracts changes as future commodity price expectations
change compared to the contract prices on the derivatives. If the expected
future commodity prices increase compared to the contract prices on the
derivatives, losses are recognized; and if the expected future commodity prices
decrease compared to the contract prices on the derivatives, gains are
recognized. During the nine months ended September 30, 2020, the Company unwound
all of its natural gas fixed price swaps, oil fixed price swaps, and

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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

Panhandle Eastern Pipeline basis swaps for 2020 and 2021, for a cost of approximately $356,000. As of September 30, 2020, the Company had no derivative positions.

General and Administrative Expenses



General and administrative expenses are costs not directly associated with field
operations and reflect the costs of employees including executive officers,
related benefits, office leases and professional fees. General and
administrative expenses decreased by approximately $11 million or 23% to
approximately $38 million for the nine months ended September 30, 2020, from
approximately $49 million for the nine months ended September 30, 2019. The
decrease was primarily due to lower share-based compensation expenses, which
were a negative expense of approximately $3 million based on the fair value of
outstanding awards, and lower salaries and benefits related expenses due to
lower headcount, partially offset by increased severance expenses. Severance
expenses were approximately $15 million for the nine months ended September 30,
2020, compared to $2 million for the nine months ended September 30,
2019. General and administrative expenses per Mcfe increased to $2.61 per Mcfe
for the nine months ended September 30, 2020, from $0.69 per Mcfe for the nine
months ended September 30, 2019, due to lower production volumes associated with
divestitures and increased severance expenses.

Exploration Costs

Exploration costs were approximately $413,000 for the nine months ended September 30, 2020, compared to $4 million for the nine months ended September 30, 2019.

Depreciation, Depletion and Amortization



Depreciation, depletion and amortization decreased by approximately $46 million
or 71% to approximately $19 million for the nine months ended September 30,
2020, from approximately $65 million for the nine months ended September 30,
2019. Depreciation, depletion and amortization per Mcfe increased to $1.31 per
Mcfe for the nine months ended September 30, 2020, from $0.90 per Mcfe for the
nine months ended September 30, 2019.

Impairment of Assets Held for Sale and Long-Lived Assets



During the nine months ended September 30, 2020, the Company recorded impairment
charges of approximately $341 million. Approximately $237 million was recorded
primarily to reduce the carrying value of Blue Mountain Midstream's assets to
fair value. In addition, approximately $88 million related to proved and
unproved oil and natural gas properties located in Oklahoma, approximately $12
million to divested properties located in North Louisiana, and approximately $4
million to divested properties located in East Texas. The impairment charges
recorded in the three months ended September 30, 2020, were primarily triggered
by the Company's exit from the midstream business, with the fair value being
predominantly driven by the contract price of the Blue Mountain Divestiture. The
impairment charges recorded in the first quarter and second quarter of 2020 were
primarily due to declines in commodity prices and declines in expected future
volumes. During the nine months ended September 30, 2019, the Company recorded
noncash impairment charges of approximately $113 million. Of this, approximately
$95 million related to divested oil and natural gas properties located in the
Hugoton Basin and approximately $18 million to divested properties located in
Michigan. The impairment charges were primarily due to a decline in commodity
prices. See Note 1 for additional information about impairment and Note 3 for
information about divestitures.

Gains (Losses) on Sale of Assets and Other, Net



During the nine months ended September 30, 2020, the Company recorded a net loss
of approximately $1 million, including bad debt expense of approximately $2
million, a net loss of approximately $1 million on the sale of North Louisiana
Assets, net losses from other divestitures and the disposal of furniture and
equipment, partially offset by a net gain of approximately $1 million on the
Drunkards Wash Asset Sale. During the nine months ended September 30, 2019, the
Company recorded a net gain of approximately $25 million, related to net gains
from divestitures of approximately $37 million, partially offset by net losses,
primarily related to divestiture activity. See Note 3 for information about
divestitures.

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Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations - Continued

Other Income and (Expenses)



                                                  Nine Months Ended September 30,
                                                    2020                  2019             Variance
                                                                   (in thousands)

Interest expense, net of amounts capitalized $ (2,368 ) $


  (5,403 )   $       3,035
Other, net                                              (1,317 )                (708 )            (609 )
                                               $        (3,685 )     $        (6,111 )   $       2,426




Interest expense decreased primarily due to lower outstanding debt during the
nine months ended September 30, 2020, compared to the same period of the prior
year. For the nine months ended September 30, 2020, "other, net" is primarily
related to the write-off of a portion of unamortized deferred financing fees of
approximately $468,000 and commitment fees for the undrawn portion of the Credit
Facilities, partially offset by interest income and rental income. For the nine
months ended September 30, 2019, "other, net" is primarily related to write off
of a portion of unamortized deferred financing fees of approximately $700,000
and commitment fees for the undrawn portion of the Credit Facilities, partially
offset by interest and rental income. See "Debt" under "Liquidity and Capital
Resources" below for additional details.

Reorganization Items, Net



Reorganization items represent costs directly associated with the Chapter 11
proceedings since the petition date. During the nine months ended September 30,
2020, and September 30, 2019, reorganization items were approximately $704,000
and $756,000, respectively, primarily related to legal and other professional
fees.

Income Tax Expense

The Company recognized no income tax expense for the nine months ended
September 30, 2020, because of a full valuation allowance recorded in the third
quarter of 2019, compared to income tax expense of approximately $129 million
for the nine months ended September 30, 2019. During the third quarter of 2019,
and for the first time since Riviera's inception, the Company's earnings were a
cumulative loss, primarily due to losses generated during 2019. Based on the
cumulative loss and projections of future taxable loss for the periods in which
deferred tax assets are deductible, the Company recorded a full valuation
allowance against all of its deferred tax assets.

Net Loss



A net loss of approximately $359 million was incurred for the nine months ended
September 30, 2020, compared to approximately $220 million for the nine months
ended September 30, 2019. See discussion above for explanations of variances.

Liquidity and Capital Resources



The Company's sources of cash have primarily consisted of proceeds from
divestitures of oil and natural gas properties, net cash provided by operating
activities and borrowings under the Blue Mountain Credit Facility. As a result
of divesting certain oil and natural gas properties, selling an office building,
and inclusive of deposits from fourth quarter divestitures, during the nine
months ended September 30, 2020, the Company received approximately $101 million
in net cash proceeds. The Company has used its cash to fund capital
expenditures, for distributions to shareholders, and for repurchases of Riviera
common stock. See Note 18 for information about the Company's Plan of
Liquidation.

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An unknown buyer acquired substantially all upstream assets of Riviera Resources, Inc. for $7.5 million.	11/20/11	CI
Tranche Update on Riviera Resources, Inc.'s Equity Buyback Plan announced on August 22, 2018.	03/20/03	CI
Riviera Resources, Inc. Reports Earnings Results for the Third Quarter Ended September 30, 2020	03/20/03	CI
Riviera Resources, Inc. Appoints Darren Schluter as Executive Vice President, Effective October 23, 2020	13/20/13	CI
Riviera Resources Announces Cash Distribution, Payable on or Around October 28, 2020	13/20/13	CI
Riviera Resources, Inc. Announces Executive Changes	13/20/13	CI
Riviera Resources, Inc. Announces Management Changes	13/20/13	CI
An unknown buyer acquired Remaining North Louisiana Assets of Riviera Resources, Inc. for approximately $22 million.	13/20/13	CI
Rheinbund, LLC completed the acquisition of Blue Mountain Midstream LLC from Riviera Resources, Inc..	08/20/08	CI
NGLF Energy, LLC completed the acquisition of North Louisiana Properties from Riviera Resources, Inc..	01/20/01	CI
Rheinbund, LLC entered into a Membership Interest Purchase Agreement to acquire Blue Mountain Midstream LLC from Riviera Resources, Inc. for approximately $110 million.	24/20/24	CI
Tranche Update on Riviera Resources, Inc.'s Equity Buyback Plan announced on August 22, 2018.	07/20/07	CI
Riviera Resources, Inc. Announces Consolidated Production Results for the Second Quarter Ended June 30, 2020	06/20/06	CI
Riviera Resources, Inc. Reports Earnings Results for the Second Quarter Ended June 30, 2020	06/20/06	CI
NGLF Energy, LLC signed a definitive agreement to acquire an unknown stake in North Louisiana Properties from Riviera Resources, Inc. for $26.5 million.	28/20/28	CI
Transcript : Riviera Resources, Inc. - Shareholder/Analyst Call	24/20/24
Tranche Update on Riviera Resources, Inc.'s Equity Buyback Plan announced on August 22, 2018.	08/20/08	CI
Transcript : Riviera Resources, Inc., Q1 2020 Earnings Call, May 07, 2020	07/20/07
Riviera Resources, Inc. Announces Consolidated Production Results for the First Quarter Ended March 31, 2020	07/20/07	CI
Riviera Resources, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2020	07/20/07	CI
Riviera Resources, Inc. Approves Cash Distribution, Payable on or Around May 12, 2020	28/20/28	CI
Riviera Resources, Inc. Announces Board Changes	25/20/25	CI
Riviera Resources, Inc. Announces Resignation of C. Gregory Harper Member of Board of Directors , Effective April 27, 2020	17/20/17	CI
Riviera Resources, Inc. Provides Update on Its Operated Drilling Program in the Ruston Field of North Louisiana	09/20/09	CI
Riviera Resources, Inc. Declares Cash Distribution, Payable on April 24, 2020	09/20/09	CI

Riviera Resources, Inc.

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RIVIERA RESOURCES : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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