Montage Resources Corporation (NYSE:MR) (the “Company” or
“Montage Resources”) today announced its second quarter 2020
operational and financial results and updated full year 2020
guidance. In addition, the Company will be posting an updated
investor presentation to its corporate website.
Second Quarter 2020 Highlights:
- Average net daily production was 551.7 MMcfe per day, above the
midpoint of the Company’s previously issued guidance range,
consisting of 83% natural gas and 17% liquids
- Realized an average natural gas price, before the impact of
cash settled commodity derivatives and firm transportation
expenses, of $1.57 per Mcf, a $0.15 per Mcf discount to the average
monthly NYMEX settled natural gas price during the quarter, better
than analyst consensus expectations
- Average natural gas equivalent realized price was $2.15 per
Mcfe, including cash settled commodity derivatives and excluding
firm transportation expenses
- Per unit cash production costs (including lease operating,
transportation, gathering and compression, production and ad
valorem taxes) were $1.25 per Mcfe, better than analyst consensus
expectations
- Cash general and administrative expenses1 were approximately
$7.4 million, a decrease of approximately 14% compared to the first
quarter of 2020 and approximately 19% compared to the second
quarter of 2019 and better than analyst consensus expectations
- Capital spending for the quarter was $29.1 million,
approximately 20% better than analyst consensus expectations
- Operational efficiency achievements yielded a Company record
average number of completion stages per day for the quarter at 10,
a Company record number of completion stages on a single pad at
11.5, and a Company record number of completion stages in one day
at 15. Recent normalized well costs of approximately $808 per foot
are below current type curve estimates of approximately $825 per
foot in Utica Dry Gas area
- Subsequent to the end of the second quarter 2020, the Company
announced a non-binding letter of intent to sell its non-core
wellhead gathering infrastructure
1
Non-GAAP measure. See reconciliation for details
John Reinhart, President and CEO, commented on the Company’s
operational and financial results, “This was another solid earnings
report which illustrated our consistent focus on execution and
efficiency. The continued outperformance of our wells along with
our operating cadence, has allowed us to maintain our full year
outlook on production expectations, despite the meaningful
curtailment of production during the second quarter. The Company’s
swift response to market conditions early in the year with the
adjustment in our development plan towards increased dry gas
production allows us to capture the benefits of the improving
natural gas macro conditions during the second half of 2020 and
2021. Our strong operational performance driven by our robust
planning process has allowed the Company to realize additional
savings on our all-in drilling and completion costs from our
initial 2020 plan. Our most recent dry gas Utica pad achieved costs
of approximately $808 per foot when normalized to a 13,000 foot
lateral length, and the Company set new internal records for
completions stages, averaging 11.5 stages per day on our most
recent pad and setting a single day record of 15 stages in one day.
Despite a significant amount of commodity price volatility during
the second quarter 2020, we have again been able to deliver a
strong natural gas realized price with our ability to optimize this
production to buyers needing to fill unutilized capacity and
continue to view this opportunity as a competitive advantage, given
the highly uncommitted nature and flexibility of our production
base. Our ongoing financial discipline has strengthened our balance
sheet and liquidity position, which would be further enhanced by
the closing of our recently announced non-binding letter of intent
to sell our non-core gathering assets in Ohio. Our proven track
record of execution throughout 2019 and into 2020 has solidified
our position not just as a cost and efficiency leader, but also as
a team with a winning strategy that remains well positioned to
leverage our experience to achieve our goals of free cash flow
generation and debt reduction.”
Operational Discussion
The Company’s net production for the three and six months ended
June 30, 2020 and 2019 is set forth in the following table:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
Production:
Natural gas (MMcf)
41,720.8
39,119.0
86,019.4
66,324.0
NGLs (Mbbls)
973.9
1,033.3
2,192.1
2,013.8
Oil (Mbbls)
440.1
569.0
1,101.8
1,167.0
Total (MMcfe)
50,204.8
48,732.8
105,782.8
85,408.8
Average daily production
volume:
Natural gas (Mcf/d)
458,470
429,879
472,634
366,431
NGLs (Bbls/d)
10,702
11,355
12,045
11,126
Oil (Bbls/d)
4,836
6,253
6,054
6,448
Total (MMcfe/d)
551.7
535.5
581.2
471.9
Financial Discussion
Revenue for the three months ended June 30, 2020 totaled $90.7
million, compared to $155.5 million for the three months ended June
30, 2019. Adjusted Revenue2, which includes the impact of cash
settled commodity derivatives and excludes brokered natural gas and
marketing revenue and other revenue, totaled $107.9 million for the
three months ended June 30, 2020 compared to $145.9 million for the
three months ended June 30, 2019. Net Loss for the three months
ended June 30, 2020 was ($68.9) million, or $(1.92) per share,
compared to Net Income of $27.5 million, or $0.77 per share, for
the three months ended June 30, 2019. Adjusted Net Income (Loss)2
for the three months ended June 30, 2020 was $(20.6) million, or
$(0.57) per share, compared to $14.6 million, or $0.41 per share
for the three months ended June 30, 2019. Adjusted EBITDAX2 was
$37.5 million for the three months ended June 30, 2020 compared to
$70.9 million for the three months ended June 30, 2019.
2
Adjusted Revenue, Adjusted Net
Income and Adjusted EBITDAX are non-GAAP financial measures. Tables
reconciling Adjusted Revenue, Adjusted Net Income and Adjusted
EBITDAX to the most directly comparable GAAP measures can be found
at the end of the financial statements included in this press
release.
Average realized price calculations for the three and six months
ended June 30, 2020 and 2019 are set forth in the table below:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
Average realized price (excluding cash
settled commodity derivatives and firm transportation)
Natural gas ($/Mcf)
$
1.57
$
2.41
$
1.68
$
2.66
NGLs ($/Bbl)
8.18
18.77
12.09
20.18
Oil ($/Bbl)
21.66
52.14
32.46
50.07
Total average prices ($/Mcfe)
1.65
2.94
1.96
3.22
Average realized price (including cash
settled commodity derivatives, excluding firm
transportation)
Natural gas ($/Mcf)
$
1.98
$
2.47
$
2.07
$
2.63
NGLs ($/Bbl)
8.67
19.11
12.50
20.46
Oil ($/Bbl)
38.38
51.68
40.11
50.65
Total average prices ($/Mcfe)
2.15
2.99
2.36
3.21
Average realized price (including firm
transportation, excluding cash settled commodity
derivatives)
Natural gas ($/Mcf)
$
1.06
$
1.95
$
1.21
$
2.15
NGLs ($/Bbl)
8.18
18.77
12.09
20.18
Oil ($/Bbl)
21.66
52.14
32.46
50.07
Total average prices ($/Mcfe)
1.23
2.57
1.58
2.83
Average realized price (including cash
settled commodity derivatives and firm transportation)
Natural gas ($/Mcf)
$
1.47
$
2.01
$
1.61
$
2.12
NGLs ($/Bbl)
8.67
19.11
12.50
20.46
Oil ($/Bbl)
38.38
51.68
40.11
50.65
Total average prices ($/Mcfe)
1.72
2.62
1.98
2.82
*rounded to the nearest penny
The Company’s cash production costs (which include lease
operating, transportation, gathering and compression, production
and ad valorem taxes) are shown in the table below. Per unit cash
production costs, which include $0.42 per Mcfe of firm
transportation expense, were $1.25 per Mcfe for the second quarter
of 2020, a decrease of approximately 7% compared to the second
quarter of 2019.
General and administrative expense (including one-time
merger-related expenses and severance) was $11.6 million and $13.6
million for the three months ended June 30, 2020 and 2019,
respectively, and is shown in the table below. Cash general and
administrative expense3 (excluding merger-related expenses,
severance and stock-based compensation expense) was $7.4 million
and $9.1 million for the three months ended June 30, 2020 and 2019,
respectively. General and administrative expense per Mcfe
(including one-time merger-related expenses and severance) was
$0.23 in the three months ended June 30, 2020 compared to $0.28 in
the three months ended June 30, 2019. Cash general and
administrative expense3 per Mcfe (excluding merger-related
expenses, severance and stock-based compensation expense) decreased
approximately 26% to $0.14 in the three months ended June 30, 2020
compared to $0.19 in the three months ended June 30, 2019.
3
Cash general and administrative
expense is a non-GAAP financial measure. A table reconciling cash
general and administrative expense to the most directly comparable
GAAP measure can be found under “Cash General and Administrative
Expense” in this press release.
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
Operating expenses (in
thousands):
Lease operating
$
9,900
$
10,141
$
21,943
$
17,666
Transportation, gathering and
compression
51,387
51,870
105,512
93,038
Production and ad valorem taxes
1,600
4,009
6,468
6,857
Total cash production costs
$
62,887
$
66,020
$
133,923
$
117,561
Depreciation, depletion, amortization and
accretion
42,768
38,597
86,903
68,494
General and administrative1
11,569
13,564
21,450
42,494
Operating expenses per Mcfe:
Lease operating
$
0.20
$
0.21
$
0.21
$
0.21
Transportation, gathering and
compression
1.02
1.06
0.99
1.09
Production and ad valorem taxes
0.03
0.08
0.06
0.08
Total cash production costs
$
1.25
$
1.35
$
1.26
$
1.38
Depreciation, depletion, amortization and
accretion
0.85
0.79
0.82
0.80
General and administrative2
0.23
0.28
0.20
0.50
1
Includes stock-based
compensation, merger-related expenses and severance of $ 4.2
million and $ 4.5 million for the three months ended June 30, 2020
and 2019, respectively, and $ 5.5 million and $ 25.1 million for
the six months ended June 30, 2020 and 2019, respectively
2
Includes stock-based
compensation, merger-related expenses and severance of $ 0.09 per
Mcfe and $ 0.09 per Mcfe for the three months ended June 30, 2020
and 2019, respectively, and $ 0.05 per Mcfe and $ 0.30 per Mcfe for
the six months ended June 30, 2020 and 2019, respectively
Cash Margins
The Company’s cash margins are detailed in the table below:
Three Months Ended
Three Months Ended
June 30, 2020
June 30, 2019
March 31, 2020
(per Mcfe)
Average realized price (including cash
settled commodity derivatives, excluding firm transportation)
$
2.15
$
2.99
$
2.56
Total cash production costs1
1.25
1.35
1.28
Cash production margin
$
0.90
$
1.64
$
1.28
Cash production margin %
42
%
55
%
50
%
Cash production margin
$
0.90
$
1.64
$
1.28
Cash general and administrative
expenses2
0.14
0.19
0.15
Cash operating margin
$
0.76
$
1.45
$
1.13
Cash operating margin %
35
%
48
%
44
%
Cash operating margin
$
0.76
$
1.45
$
1.13
Interest expense
0.30
0.31
0.27
Corporate cash operating margin3
$
0.46
$
1.14
$
0.86
Corporate cash operating margin %
22
%
38
%
34
%
1
Includes lease operating,
transportation, gathering and compression, and production and ad
valorem taxes
2
Cash general and administrative
expense is a non-GAAP financial measure which excludes stock-based
compensation expense, merger related expenses and severance. See
reconciliation to the most comparable GAAP measure under “Cash
General and Administrative Expense” in this press release
3
Includes lease operating,
transportation, gathering and compression, production and ad
valorem taxes, cash general & administrative expense and
interest expense. Cash general and administrative expense is a
non-GAAP financial measure which excludes stock-based compensation
expense, merger related expenses and severance See reconciliation
to the most comparable GAAP measure under “Cash General and
Administrative Expense” in this press release
Capital Expenditures
Second quarter 2020 capital expenditures were $29.1 million,
including $27.6 million for drilling and completions, $1.4 million
for land-related expenditures and $0.1 million for other
expenditures.
During the second quarter of 2020, the Company commenced
drilling 5 gross (3.4 net) operated wells, commenced completions of
7 gross (5.4 net) operated wells and turned to sales 7 gross (6.1
net) operated wells.
Financial Position and
Liquidity
As of June 30, 2020, the Company’s liquidity was $295.0 million,
consisting of $9.2 million in cash and cash equivalents and $285.8
million in available borrowing capacity under the Company’s
revolving credit facility (after giving effect to outstanding
letters of credit issued by the Company of $29.2 million and $160.0
million in outstanding borrowings).
Michael Hodges, Executive Vice President and Chief Financial
Officer, commented, “We are very proud of the results in the second
quarter of 2020 that have allowed the Company to solidify its
financial strength despite a volatile commodity price environment.
We believe that the flexibility of our portfolio and our continued
improvement in operating costs will allow us to navigate the
current operating environment without adding stress to our balance
sheet. Finally, our strong hedge book remains a key element of our
strategy, with approximately 70% of our natural gas hedged and
approximately 60% of our oil hedged (based on our revised
production profile) for 2020, providing us with a high level of
cash flow certainty and confidence in the long-term health of our
balance sheet.”
Commodity Derivatives
The Company engages in a number of different commodity trading
program strategies as a risk management tool to attempt to mitigate
the potential negative impact on cash flows caused by price
fluctuations in natural gas, NGL and oil prices. Below is a table
that illustrates the Company’s hedging activities as of June 30,
2020:
Natural Gas Derivatives:
Description
Volume
(MMBtu/d)
Production Period
Weighted Average
Price ($/MMBtu)
Natural Gas Swaps:
60,000
July 2020 – September 2020
$
2.32
80,000
July 2020 – December 2020
$
2.64
95,000
July 2020 – March 2021
$
2.54
50,000
August 2020 – December 2020
$
2.06
50,000
October 2020 – March 2021
$
2.65
50,000
January 2021 – March 2022
$
2.51
25,000
April 2021 – March 2022
$
2.47
Natural Gas Collars:
Floor purchase price (put)
25,000
January 2021 – December 2021
$
2.15
Ceiling sold price (call)
25,000
January 2021 – December 2021
$
3.03
Natural Gas Three-way Collars:
Floor purchase price (put)
80,000
July 2020 – December 2020
$
2.60
Floor sold price (put)
80,000
July 2020 – December 2020
$
1.90
Ceiling sold price (call)
80,000
July 2020 – December 2020
$
2.94
Floor purchase price (put)
45,000
January 2021 – December 2021
$
2.55
Floor sold price (put)
45,000
January 2021 – December 2021
$
2.25
Ceiling sold price (call)
45,000
January 2021 – December 2021
$
2.81
Floor purchase price (put)
20,000
April 2021 – March 2022
$
2.62
Floor sold price (put)
20,000
April 2021 – March 2022
$
2.20
Ceiling sold price (call)
20,000
April 2021 – March 2022
$
3.10
Natural Gas Call/Put Options:
Floor sold price (put)
15,000
July 2020 – September 2020
$
1.60
Floor sold price (put)
50,000
July 2020 – December 2020
$
2.30
Swaption sold price (call)
50,000
January 2021 – December 2021
$
2.75
Swaption sold price (call)
50,000
January 2022 – December 2022
$
3.00
Floor sold price (put)
50,000
January 2021 – March 2022
$
2.00
Ceiling sold price (call)
50,000
January 2022 – December 2022
$
3.00
Ceiling sold price (call)
80,000
January 2023 – December 2023
$
3.00
Basis Swaps:
Appalachia - Dominion
12,500
July 2020 – October 2020
$
(0.52
)
Appalachia - Dominion
20,000
July 2020 – December 2020
$
(0.59
)
Oil Derivatives:
Description
Volume
(Bbls/d)
Production Period
Weighted Average
Price ($/Bbl)
Oil Swaps:
2,500
July 2020 – December 2020
$
57.41
250
July 2020 – March 2021
$
53.20
250
January 2021 – March 2021
$
53.00
Oil Collars:
Floor purchase price (put)
1,000
July 2020 – December 2020
$
51.00
Ceiling sold price (call)
1,000
July 2020 – December 2020
$
62.00
Oil Three-way Collars:
Floor purchase price (put)
500
January 2021 – December 2021
$
31.25
Floor sold price (put)
500
January 2021 – December 2021
$
22.50
Ceiling sold price (call)
500
January 2021 – December 2021
$
45.00
Oil Call/Put Options:
Floor sold price (put)
500
July 2020 – December 2020
$
45.00
Swaption sold price (call)
500
January 2021 – December 2021
$
42.50
NGL Derivatives:
Description
Volume
(Bbls/d)
Production Period
Weighted Average
Price ($/Bbl)
Propane Swaps:
1,500
July 2020 – December 2020
$
20.68
500
January 2021 – December 2021
$
18.01
Subsequent to the End of the Second Quarter:
The below table illustrates the Company’s hedging activities
subsequent to the end of the second quarter 2020:
Natural Gas Derivatives:
Description
Volume
(MMBtu/d)
Production Period
Weighted Average
Price ($/MMBtu)
Natural Gas Collars:
Floor purchase price (put)
30,000
April 2021 – March 2022
$
2.40
Ceiling sold price (call)
30,000
April 2021 – March 2022
$
3.05
Basis Swaps:
Appalachia - Dominion
30,000
August 2020 – October 2020
$
(0.50
)
Oil Derivatives:
Description
Volume
(Bbls/d)
Production Period
Weighted Average
Price ($/Bbl)
Oil Collars:
Floor purchase price (put)
500
January 2021 – December 2021
$
37.50
Ceiling sold price (call)
500
January 2021 – December 2021
$
45.50
NGL Derivatives:
Description
Volume
(Bbls/d)
Production Period
Weighted Average
Price ($/Bbl)
Propane Swaps:
500
August 2020 – December 2020
$
21.74
500
January 2021 – December 2021
$
19.74
Guidance
The Company is providing its initial third quarter and updated
full year 2020 guidance as set forth in the table below (updated
guidance in italics).
Q3 2020
FY 2020
Production MMcfe/d
580 - 600
565 - 585
% Gas
81% - 83%
81% - 83%
% NGL
11% - 13%
10% - 12%
% Oil
5% - 7%
6% - 8%
Gas Price Differential ($/Mcf)1,2
$(0.15) - $(0.30)
$(0.15) - $(0.25)
Oil Differential ($/Bbl)1,3
$(9.00) - $(11.00)
$(6.50) - $(7.50)
NGL Prices (% of WTI)1
27% - 32%
30% - 35%
Cash Production Costs ($/Mcfe)4
$1.25 - $1.35
$1.25 - $1.35
Cash G&A ($mm)5
$6 - $8
$29 - $32
CAPEX ($mm)
$120 - $140
1
Excludes impact of hedges
2
Excludes the cost of firm
transportation
3
Full year 2020 amount (FY 2020)
includes the impact of declining WTI price on reported oil
differential in first quarter of 2020
4
Includes lease operating,
transportation, gathering and compression, production and ad
valorem taxes
5
Non-GAAP financial measure which
excludes stock-based compensation expense, merger related expenses
and severance. See reconciliation to the most comparable GAAP
measure under “Cash General and Administrative Expense” in this
press release
Conference Call
A conference call to review the Company’s second quarter 2020
financial and operational results is scheduled for Friday, August
7, 2020, 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 Second Quarter 2020 Earnings Call.
A replay of the call will be available through October 7, 2020. To
access the phone replay, dial 877-660-6853 or 201-612-7415 for
international callers. The conference ID is 13707434. A live
webcast of the call may be accessed through the Investor Center on
the Company’s website at www.montageresources.com. The webcast will
be archived for replay on the Company’s website for six months.
MONTAGE RESOURCES
CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share and
per share amounts)
(Unaudited)
June 30,
2020
December 31,
2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
9,221
$
12,056
Accounts receivable
59,804
77,402
Assets held for sale
1,115
1,047
Other current assets
36,609
35,509
Total current assets
106,749
126,014
PROPERTY AND EQUIPMENT
Oil and natural gas properties, successful
efforts method:
Unproved properties
487,066
508,576
Proved oil and gas properties, net
1,248,999
1,251,105
Other property and equipment, net
10,638
11,226
Total property and equipment, net
1,746,703
1,770,907
OTHER NONCURRENT ASSETS
Other assets
5,688
7,616
Operating lease right-of-use assets
33,692
36,975
Assets held for sale
3,430
9,665
TOTAL ASSETS
$
1,896,262
$
1,951,177
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES
Accounts payable
$
133,741
$
119,907
Accrued capital expenditures
19,510
43,500
Accrued liabilities
29,283
53,866
Accrued interest payable
22,282
21,308
Liabilities associated with assets held
for sale
4,052
2,815
Operating lease liability
13,826
12,666
Total current liabilities
222,694
254,062
NONCURRENT LIABILITIES
Debt, net of unamortized discount and debt
issuance costs
501,928
500,541
Revolving credit facility
160,000
130,000
Asset retirement obligations
29,952
29,877
Other liabilities
21,240
8,029
Operating lease liability
20,247
24,569
Liabilities associated with assets held
for sale
6,978
7,013
Total liabilities
963,039
954,091
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred stock, 50,000,000 authorized, no
shares issued and outstanding
—
—
Common stock, $0.01 par value,
1,000,000,000 authorized, 36,034,837 and 35,770,934 shares issued
and outstanding, respectively
386
383
Additional paid in capital
2,354,929
2,352,309
Treasury stock, shares at cost; 2,600,672
and 2,508,485 shares, respectively
(10,511
)
(10,049
)
Accumulated deficit
(1,411,581
)
(1,345,557
)
Total stockholders’ equity
933,223
997,086
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
1,896,262
$
1,951,177
MONTAGE RESOURCES
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share
data)
(Unaudited)
For the Three Months
Ended
June 30,
For the Six Months
Ended
June 30,
2020
2019
2020
2019
REVENUES
Natural gas, oil and natural gas liquids
sales
$
83,082
$
143,429
$
206,953
$
275,257
Brokered natural gas and marketing
revenue
7,540
11,989
17,028
21,519
Other revenue
62
122
127
261
Total revenues
90,684
155,540
224,108
297,037
OPERATING EXPENSES
Lease operating
9,900
10,141
21,943
17,666
Transportation, gathering and
compression
51,387
51,870
105,512
93,038
Production and ad valorem taxes
1,600
4,009
6,468
6,857
Brokered natural gas and marketing
expense
7,746
11,983
17,004
21,443
Depreciation, depletion, amortization and
accretion
42,768
38,597
86,903
68,494
Exploration
9,073
15,193
22,344
31,981
General and administrative
11,569
13,564
21,450
42,494
(Gain) loss on sale of assets
(1,911
)
1
(1,357
)
2
Other expense
19
12
34
38
Total operating expenses
132,151
145,370
280,301
282,013
OPERATING INCOME (LOSS)
(41,467
)
10,170
(56,193
)
15,024
OTHER INCOME (EXPENSE)
Gain (loss) on derivative instruments
(10,925
)
29,738
29,207
24,808
Interest expense, net
(14,930
)
(15,109
)
(29,764
)
(28,949
)
Other income
4
8
17
8
Total other income (expense), net
(25,851
)
14,637
(540
)
(4,133
)
INCOME (LOSS) FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES
(67,318
)
24,807
(56,733
)
10,891
Income tax benefit (expense)
—
—
—
—
INCOME (LOSS) FROM CONTINUING
OPERATIONS
(67,318
)
24,807
(56,733
)
10,891
Income (loss) from discontinued
operations, net of income tax
(1,533
)
2,705
(9,291
)
2,523
NET INCOME (LOSS)
$
(68,851
)
$
27,512
$
(66,024
)
$
13,414
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK
Basic:
Weighted average common stock
outstanding
35,856
35,678
35,816
30,645
Income (loss) from continuing
operations
$
(1.88
)
$
0.69
$
(1.58
)
$
0.36
Income (loss) from discontinued
operations
(0.04
)
0.08
(0.26
)
0.08
Net income (loss)
$
(1.92
)
$
0.77
$
(1.84
)
$
0.44
Diluted:
Weighted average common stock
outstanding
35,856
35,826
35,816
30,830
Income (loss) from continuing
operations
$
(1.88
)
$
0.69
$
(1.58
)
$
0.36
Income (loss) from discontinued
operations
(0.04
)
0.08
(0.26
)
0.08
Net income (loss)
$
(1.92
)
$
0.77
$
(1.84
)
$
0.44
Adjusted Revenue
Adjusted revenue is a non-GAAP financial measure. The Company
defines adjusted revenue as follows: total revenues plus or minus
net cash receipts or payments on settled commodity derivative
instruments less brokered natural gas and marketing revenue and
other revenue. The Company believes adjusted revenue provides
investors with helpful information with respect to the performance
of the Company’s operations and management uses adjusted revenue to
evaluate its ongoing operations and for internal planning and
forecasting purposes. See the table below, which reconciles
adjusted revenue and total revenues for the three and six months
ended June 30, 2020 and 2019.
Three Months Ended
June 30,
Six Months Ended
June 30,
$ thousands
2020
2019
2020
2019
Total revenues
$
90,684
$
155,540
$
224,108
$
297,037
Net cash receipts (payments) on settled
commodity derivatives
24,788
2,440
43,023
(746
)
Brokered natural gas and marketing
revenue
(7,540
)
(11,989
)
(17,028
)
(21,519
)
Other revenue
(62
)
(122
)
(127
)
(261
)
Adjusted revenue
$
107,870
$
145,869
$
249,976
$
274,511
Adjusted Net Income
(Loss)
Adjusted net income (loss) represents income (loss) from
continuing operations before income taxes adjusted for certain
non-cash items as set forth in the table below. We believe adjusted
net income (loss) is used by many investors and published research
in making investment decisions and evaluating operational trends of
the Company and its performance relative to other oil and gas
producing companies. Adjusted net income (loss) is not a measure of
net income (loss) from continuing operations as determined by GAAP.
See the table below for a reconciliation of adjusted net income
(loss) and net income (loss) from continuing operations before
income taxes for the three and six months ended June 30, 2020 and
2019.
Three Months Ended
June 30,
Six Months Ended
June 30,
$ thousands
2020
2019
2020
2019
Income (loss) from continuing operations
before income taxes, as reported
$
(67,318
)
$
24,807
$
(56,733
)
$
10,891
(Gain) loss on derivative instruments
10,925
(29,738
)
(29,207
)
(24,808
)
Net cash receipts (payments) on settled
derivatives
24,857
2,440
43,092
(746
)
Dry hole and other
14
163
6
163
Stock-based compensation
1,764
552
2,624
6,553
Impairment of unproved properties
8,638
12,443
19,359
22,043
(Gain) loss on sale of assets
(1,911
)
1
(1,357
)
2
Merger-related expenses
(14
)
3,938
176
18,521
Severance
2,457
—
2,681
—
Income (loss) before income taxes, as
adjusted
(20,588
)
14,606
(19,359
)
32,619
Adjusted net income (loss)
$
(20,588
)
$
14,606
$
(19,359
)
$
32,619
Net income (loss) per common
share
Basic
$
(1.92
)
$
0.77
$
(1.84
)
$
0.44
Diluted
$
(1.92
)
$
0.77
$
(1.84
)
$
0.44
Adjusted net income (loss) per common
share
Basic
$
(0.57
)
$
0.41
$
(0.54
)
$
1.06
Diluted
$
(0.57
)
$
0.41
$
(0.54
)
$
1.06
Weighted average common shares
outstanding
Basic
35,856
35,678
35,816
30,645
Diluted
35,856
35,826
35,816
30,830
Adjusted EBITDAX
Adjusted EBITDAX is a supplemental non-GAAP measure that is used
by the Company to evaluate its financial results. The Company
defines Adjusted EBITDAX as net income or loss before interest
expense or interest income; income taxes; write down of abandoned
leases; impairments; depreciation, depletion, amortization and
accretion; gain or loss on derivative instruments; net cash
receipts or payments on settled commodity derivative instruments,
and premiums paid or received on options that settled during the
period; non-cash compensation expense; gain or loss from sale of
interest in gas properties; exploration expenses; and other unusual
or infrequent items set forth in the table below. Adjusted EBITDAX
is not a measure of net income or loss as determined by GAAP. See
the table below for a reconciliation of Adjusted EBITDAX to net
income or net loss.
Three Months Ended
June 30,
Six Months Ended
June 30,
$ thousands
2020
2019
2020
2019
Net income (loss)
$
(68,851
)
$
27,512
$
(66,024
)
$
13,414
Depreciation, depletion, amortization and
accretion
42,768
38,597
86,903
68,494
Exploration expense
9,073
15,193
22,344
31,981
Stock-based compensation
1,764
552
2,624
6,553
(Gain) loss on sale of assets
(1,911
)
1
(1,357
)
2
(Gain) loss on derivative instruments
10,925
(29,738
)
(29,207
)
(24,808
)
Net cash receipts (payments) on settled
commodity derivatives
24,788
2,440
43,023
(746
)
Interest expense, net
14,930
15,109
29,764
28,949
Other income
(4
)
(8
)
(17
)
(8
)
Merger-related expenses
(14
)
3,938
176
18,521
(Income) loss from discontinued
operations(1)
1,533
(2,705
)
9,291
(2,523
)
Severance
2,457
—
2,681
—
Adjusted EBITDAX
$
37,458
$
70,891
$
100,201
$
139,829
1
Includes a $6.8 million non-cash
impairment of proved properties held for sale for the six months
ended June 30, 2020
Cash General and Administrative
Expenses
Cash general and administrative expenses is a non-GAAP financial
measure used by the Company to provide a measure of administrative
expenses used by many investors and in 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.
Three Months Ended
June 30,
Six Months Ended
June 30,
Guidance
$ thousands
2020
2019
2020
2019
For the Three
Months Ending
September 30,
2020
For the Year
Ending
December 31,
2020
General and administrative expenses,
estimated to be reported
$
11,569
$
13,564
$
21,450
$
42,494
$6,500-$9,000
$35,500-$41,500
Stock-based compensation
(1,764
)
(552
)
(2,624
)
(6,553
)
(500 - 1,000)
(4,000 - 6,000)
Cash general and administrative
expenses
$
9,805
$
13,012
$
18,826
$
35,941
$6,000-$8,000
$31,500-$35,500
Merger-related expenses
14
(3,938
)
(176
)
(18,521
)
—
(0 - 500)
Severance
(2,457
)
—
(2,681
)
—
—
(2,500 - 3,000)
Cash general and administrative expenses,
excluding merger-related expenses and severance
$
7,362
$
9,074
$
15,969
$
17,420
$6,000-$8,000
$29,000-$32,000
About Montage Resources
Montage Resources is an exploration and production company with
approximately 195,000 net effective core undeveloped acres
currently focused on the Utica and Marcellus Shales of Southeast
Ohio, West Virginia and North Central Pennsylvania. For more
information, please visit the Company’s website at
www.montageresources.com.
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, including statements regarding
Montage Resources’ strategy, future operations, financial position,
estimated revenues and income/losses, projected costs and capital
expenditures, prospects, and plans and objectives of management are
forward-looking statements. When used in this press release, the
words “plan,” “endeavor,” “goal,” “will,” “would,” ”should,”
“could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,”
”efforts,” “continue,” “position,” “potential,” “committed,”
“target, ”project” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. These forward-looking
statements are based on 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 under the heading “Risk Factors” in Montage Resources’
Annual Report on Form 10-K for the fiscal year ended December 31,
2019 filed with the Securities and Exchange Commission on March 10,
2020 (the “2019 Annual Report”) and in Montage Resources’ other
filings and reports with the Securities and Exchange
Commission.
Forward-looking statements may include, but are not limited to,
statements about business strategy; reserves; general economic
conditions; financial strategy, liquidity and capital required for
developing properties and timing related thereto; realized natural
gas, NGLs and oil prices and the volatility of those prices;
write-downs of natural gas and oil asset values due to declines in
commodity prices; timing and amount of future production of natural
gas, NGLs and oil; 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 and joint ventures; leasehold
terms expiring before production can be established and costs to
extend such terms the costs, terms and availability of gathering,
processing, fractionation and other midstream services; the costs,
terms and availability of downstream transportation services;
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 and consummation of the
proposed asset disposition anticipated in the letter of intent.
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, the severity and continued
duration of the COVID-19 pandemic, related economic effects and the
resulting negative impact on the demand for natural gas, NGLs and
oil; operational challenges relating to the COVID-19 pandemic,
including logistical challenges, protecting the health and
well-being of the Company’s employees, remote work arrangements,
performance of counterparty contracts and supply chain disruptions;
legal and environmental risks; drilling and other operating risks;
regulatory changes, including U.S. federal, state and local tax
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; risks
associated with the Company’s level of indebtedness; the timing of
development expenditures, and the other risks described under the
heading “Risk Factors” in the 2019 Annual Report and in Montage
Resources’ other filings and reports with the Securities and
Exchange Commission.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200806006013/en/
Montage Resources Corporation Douglas Kris, Investor Relations
469-444-1736 dkris@mresources.com
Montage Resources (NYSE:MR)
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Montage Resources (NYSE:MR)
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