Montage Resources Corporation (NYSE:MR) (the “Company” or
“Montage”) (formerly known as Eclipse Resources Corporation,
“Eclipse Resources”) is pleased to announce its initial 2019
financial and operating guidance, schedule its fourth quarter and
full year 2018 earnings release and conference call, and provide
information regarding its upcoming 2019 Analyst Day.
The 2019 financial and operating guidance highlights
include:
- 2019 estimated net capital expenditures
of between $375 million to $400 million allocated almost
entirely to revenue-generating drilling and completions activity
and focused on low risk, highly deliverable locations that the
Company believes maximize return on invested capital
- 2019 estimated net daily production
sales volumes of between 500 to 525 million cubic feet equivalent
per day ("MMcfe"); when adjusting the 2019 daily production sales
volumes guidance to a full 12 month pro forma basis, this equates
to approximately 16% production growth over 2018 results1
- Expected achievement of cash flow
neutrality by the end of 2019 with a year-end 2019 leverage ratio
of approximately 2.0 times
1 Based upon 2018 production from Eclipse Resources Corporation
and Blue Ridge Mountain Resources, Inc.
President and Chief Executive Officer, John
Reinhart commented, "Our 2019 guidance demonstrates the
strategic shift underway at Montage as we focus on financial,
operational and organizational efficiencies in order to deliver
value to our stakeholders. We believe the quality and depth of the
Company’s inventory of locations will allow us to achieve
double-digit production growth while focusing on cash flow
generation in our highly economic core areas. We are excited to
announce a capital program in 2019 that we expect to be
predominantly funded from operating cash flow and augmented by
existing liquidity while providing cash flow neutrality by the end
of 2019.”
2019 Production and Capital Budget
Guidance
The Company possesses a deep inventory of both liquids-rich and
dry locations in the Utica Shale and Marcellus Shale that the
Company believes will deliver impressive production growth and
strong cash margins. First quarter and full year 2019 guidance are
set forth in the table below:
Q1 20191 FY
20192 Production MMcfe/d 385 - 395 500 - 525 % Gas 73% -
77% 74% - 78% % NGL 12% - 17% 12% - 15% % Oil 9% - 11% 9% - 11% Gas
Price Differential ($/Mcf)3,4 $(0.20) - $(0.30) $(0.20) - $(0.30)
Oil Differential ($/Bbl)3 $(6.50) - $(7.00) $(6.50) - $(7.50) NGL
Prices (% of WTI)3 40% - 45% 40% - 50% Cash Production Costs
($/Mcfe)5 $1.55 - $1.65 $1.55 - $1.65 Cash G&A ($mm)6 $8 - $10
$34 - $38 CAPEX ($mm) $375 - $400 1 Includes activity for Blue
Ridge Mountain Resources, Inc. from March 1, 2019 through March 31,
2019 2 Includes activity for Blue Ridge Mountain Resources, Inc.
from March 1, 2019 through December 31, 2019 3 Excludes impact of
hedges 4 Excludes the cost of firm transportation 5 Includes lease
operating, transportation, gathering and compression, production
and ad valorem taxes
6 Non-GAAP financial measure which
excludes non-cash compensation and merger related expenses; see the
discussion and reconciliationsto the most comparable GAAP measure
under “Cash General and Administrative Expenses” below in this
press release
The 2019 estimated capital budget range of $375 million to
$400 million is based upon a two rig drilling program
allocated approximately 55% to liquids-rich locations and
approximately 45% to dry gas locations. Just over 90% of the
capital expenditure program in 2019 has been designated to drilling
and completion activity in order to maximize the return on invested
capital. The Company’s 2019 development plan implements a shift in
focus to reducing cycle times and improving capital efficiency in
order to accelerate cash flow and achieve the highest possible
returns. In order to realize these improved cash flows as well as
de-risk the operational execution of its development program, the
Company plans to optimize many operational parameters, including
reducing its planned lateral length spuds to an average of
approximately 11,700 feet and lowering its initial development pad
size to approximately four initial wells per pad. In addition, the
Company has seen strong production results from its first operated
well in its Flat Castle area located in North Central Pennsylvania
and will be assessing multiple options with respect to achieving
enhanced value for that asset within the Company’s portfolio.
Net production sales volumes for 2019 are expected to be between
500 to 525 MMcfe per day with approximately 76% of 2019 production
from natural gas and approximately 24% from oil and natural gas
liquids. The net production profile for 2019 will be weighted
toward the second half of the year due to limited completion
activity during the fourth quarter of 2018 and the first quarter of
2019. In addition, a number of the wells turned to sales over the
past six months were wells associated with the joint venture
agreement with Sequel Energy, which is expected to be completed
during the first half of 2019, therefore net production sales
volumes are anticipated to accelerate during the second half of
2019 as the Company moves toward development of its higher working
interest locations. The projected production profile for 2019 is
significantly above the Company’s firm transportation commitments
and provides multiple options regarding the Company’s allocation of
development activity between liquids-rich and dry gas locations
during the second half of 2019, while also allowing the Company the
potential to maximize its realized natural gas price from a
balanced portfolio of sales points both in-basin and
out-of-basin.
With respect to cash production costs, Montage will begin
delivering a portion of its NGL sales volumes to the Mariner East 2
pipeline project during the first quarter of 2019 and expects to
realize an increase in its transportation costs of approximately
$0.08 to $0.10 per Mcfe over historical cash production costs while
also seeing an incremental increase on a per unit basis from a full
year of Rover capacity utilization. The Mariner East 2 project,
coupled with the higher NGL contractual price realizations related
to the production sales volumes from Blue Ridge Mountain Resources,
Inc., are expected to allow Montage to realize an improvement to
historic NGL pricing that is incrementally positive to the
Company’s NGL cash margins.
Financial Update
As previously announced, the Company amended and restated its
revolving credit facility, increasing the borrowing base from $225
million to $375 million and extending the maturity date to 2024. In
addition, the Company has reduced the letters of credit outstanding
under its revolving credit facility by approximately 50% to
approximately $13.5 million due to the improved credit profile of
the Company. The Company believes that this increase in liquidity,
combined with the anticipated significant incremental cash flow
from the merger with Blue Ridge Mountain Resources, Inc., is
expected to position Montage with peer-leading leverage metrics and
significant financial flexibility to develop its inventory of high
quality assets and position itself for future accretive strategic
opportunities.
The Company has a strong hedging portfolio in place and actively
manages its exposure to commodity prices through a number of
commodity trading program strategies as a risk management tool to
mitigate the potential negative impact on cash flows caused by
price fluctuations in natural gas, NGL and oil prices. As of
February 28, 2019, the Company has approximately 69% of its
projected 2019 natural gas production hedged at an average floor
price1 of $2.78 per MMBtu and an average ceiling price of
approximately $2.99 per MMBtu. The Company has approximately 38% of
its projected 2019 crude oil production hedged at an average floor
price price1 of $52.20 per Bbl and an average ceiling price of
$61.28 per Bbl.
1 For the purposes of calculating three-way floor price, the
higher put value was used
Earnings Release and Conference
Call
The Company will release fourth quarter and full year 2018
financial and operational results for the former Eclipse Resources
on Tuesday, March 12, 2019 after the market close. A conference
call to review the Company’s fourth quarter and full year financial
and operational results is scheduled for Wednesday, March 13, 2019
at 10:00 a.m. Eastern Time. To participate in the call, please dial
877-709-8150 or 201-689-8354 for international callers and
reference Montage Resources Fourth Quarter and Full Year 2018
Earnings Call. A replay of the call will be available through May
12, 2019. To access the phone replay dial 877-660-6853 or
201-612-7415 for international callers. The conference ID is
13687946. The webcast will be archived for replay on the Company’s
website for six months.
Analyst Day
The Company is pleased to announce that it will host an Analyst
Day on Wednesday, March 20, 2019 at the JW Marriot Hotel in
Houston, Texas. A live audio webcast of the event will begin at
9:00 am (Central) and can be accessed on the “Investors” section of
the Montage Resources website at www.montageresources.com which
will be launched shortly. The Company plans to post the Analyst Day
Presentation to the “Investors” section of the Company’s website
just prior to the event.
About Montage Resources
Montage Resources is an exploration and production company with
approximately 227,000 net effective undeveloped acres currently
focused on the Utica and Marcellus Shales of southeast Ohio, West
Virginia and North Central Pennsylvania.
Cash General and Administrative
Expenses
Cash General and Administrative Expenses is a non-GAAP financial
measure used by the Company in the Guidance Table to provide a
measure of administrative expenses used by many investors and
published research in making investment decisions and evaluating
operational trends of the Company. See the table below for a
reconciliation of Cash General and Administrative Expenses and
General and Administrative Expenses.
Guidance $ thousands
For the Three Months Ending
March 31, 2019
For the Year Ending December 31,
2019
General and administrative expenses, estimated to bereported
$29,000-$38,000 $73,000 - $90,000 Stock-based compensation expense
(6,000 - 8,000) (9,000 - 12,000) Cash general and administrative
expenses $23,000 - $30,000 $64,000 - $78,000 Merger related
expenses (15,000 - 20,000) (30,000 - 40,000)
Cash general and administrative expenses,
excluding merger relatedexpenses
$8,000-$10,000 $34,000 - $38,000
Forward-Looking
Statements
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical fact
included in this press release, regarding Montage Resources’
strategy, future operations, financial position, estimated revenues
and income/losses, projected costs and capital expenditures,
prospects, plans and objectives of management are forward-looking
statements. When used in this press release, the words “plan,”
“endeavor,” “will,” “would,” “could,” “believe,” “anticipate,”
“intend,” “estimate,” “expect,” “project,” “delivering,” position,”
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 Montage Resources’ 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 keep in mind the risk
factors and other cautionary statements described in “Item 1.A.
Risk Factors” in the Company’s’ Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 2, 2018, as
amended (the “2017 Annual Report”), and the Company’s Quarterly
Reports on Form 10-Q, as well as under the heading “Risk Factors”
in the definitive consent solicitation statement/information
statement/prospectus related to the combination with Blue Ridge
filed by the Company with the Securities and Exchange Commission on
January 28, 2019.
Forward-looking statements may include, but are not limited to,
statements about Montage Resources’ business strategy; reserves;
general economic conditions; financial strategy, liquidity and
capital required for developing its properties and timing related
thereto; realized natural gas, NGLs and oil prices; timing and
amount of future production of natural gas, NGLs and oil; its
hedging strategy and results; future drilling plans; competition
and government regulations, including those related to hydraulic
fracturing; the anticipated benefits under commercial agreements;
marketing of natural gas, NGLs and oil; leasehold and business
acquisitions; the costs, terms and availability of gathering,
processing, fractionation and other midstream services; the costs,
terms and availability of downstream transportation services;
general economic conditions; credit markets; uncertainty regarding
future operating results, including initial production rates and
liquid yields in type curve areas; and plans, objectives,
expectations and intentions contained in this press release that
are not historical, including, without limitation, the guidance set
forth herein. Forward-looking statements also may include
statements relating to the combination with Blue Ridge, including
statements regarding the combined company and its operations,
integration and transition plans, synergies, cost savings,
opportunities, anticipated future performance, benefits of the
transaction and its impact on the combined company’s business,
operations, assets, results of operations, liquidity, and financial
position, and any statements of assumptions underlying any of the
foregoing.
Montage Resources cautions you that all these forward-looking
statements are subject to risks and uncertainties, most of which
are difficult to predict and many of which are beyond the Company’s
control, incident to the exploration for and development,
production, gathering and sale of natural gas, NGLs and oil. These
risks include, but are not limited to, legal and environmental
risks, drilling and other operating risks, regulatory changes,
commodity price volatility and declines in the price of natural
gas, NGLs, and oil, inflation, lack of availability of drilling,
production and processing equipment and services, counterparty
credit risk, the uncertainty inherent in estimating natural gas,
NGLs and oil 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 “Item 1A. Risk
Factors” of the 2017 Annual Report and the Company’s Quarterly
Reports on Form 10-Q. In addition, forward-looking statements are
subject to risks and uncertainties related to the combination with
Blue Ridge, including, without limitation, failure to realize or
delays in realizing expected synergies or other benefits of the
transaction, difficulties in integrating the combined operations,
disruption of management time from ongoing business operations due
to the transaction, adverse effects on the ability of the combined
company to retain and hire key personnel and maintain relationships
with suppliers and customers, negative effects of consummation of
the transaction on the market price of the Company’s common stock,
transaction costs, unknown liabilities or unanticipated expenses,
and the other risks described under the heading “Risk Factors” in
the definitive consent solicitation statement/information
statement/prospectus related to the combination with Blue Ridge
filed by the Company with the Securities and Exchange Commission on
January 28, 2019.
All forward-looking statements, expressed or implied, included
in this press release are expressly qualified in their entirety by
this cautionary statement and are based on assumptions that Montage
Resources believes to be reasonable but that may not prove to be
accurate. This cautionary statement should also be considered in
connection with any subsequent written or oral forward-looking
statements that Montage Resources or persons acting on its behalf
may issue. Except as otherwise required by applicable law, Montage
Resources disclaims any duty to update any forward-looking
statements to reflect new information or events or circumstances
after the date of this press release. Readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date hereof.
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version on businesswire.com: https://www.businesswire.com/news/home/20190228006101/en/
Montage Resources CorporationDouglas Kris, Investor
Relations814-325-2059dkris@mresources.com
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