Montage Resources Corporation (NYSE:MR) (the “Company” or
“Montage Resources”) today announced its 2020 capital expenditure
budget and first quarter and full year 2020 financial and operating
guidance.
Highlights include:
- 2020 estimated average net daily production volumes of 570 to
590 MMcfe per day, an increase of approximately 6% at the midpoint
when compared to the midpoint of the Company’s latest 2019
production guidance of 548.5 MMcfe per day
- 2020 estimated net capital expenditure budget of $190 - $210
million, a decrease of approximately 44% at the midpoint when
compared to the midpoint of the Company’s latest 2019 capital
expenditure guidance of $357.5 million
- 2020 per unit cash production costs (including lease operating,
transportation, gathering and compression, production and ad
valorem taxes) of $1.25 to $1.35 per Mcfe, a decrease of
approximately 2% at the midpoint when compared to the midpoint of
the Company’s latest 2019 per unit cash production cost guidance of
$1.33 per Mcfe
- 2020 natural gas production is approximately 56% hedged at a
weighted average floor price of $2.64 per MMBtu1 and oil production
is approximately 52% hedged at a weighted average floor price of
$57.13 per barrel of oil based upon the midpoint of our full year
2020 production guidance
- The Company’s 2020 development plan continues to focus on high
return liquids-rich Marcellus development and targets free cash
flow generation, continued cost reductions and preservation of the
balance sheet in the current commodity price environment
John Reinhart, President and CEO, commented, “Upon reflection of
our many accomplishments during 2019, I remain extremely impressed
with the high quality asset base at Montage, the optimized planning
and capital allocation processes in place, and this team’s
capabilities to outperform operational forecasts with a high level
of capital efficiency. The results already delivered in 2019
demonstrate the Company’s ability to deliver upon the financial and
operational objectives outlined during the close of the Blue Ridge
Mountain Resources merger just eleven months ago. Since the close
of the transformative merger in February 2019, we executed on a
plan that significantly reduced cycle times, lowered peer-leading
well costs, substantially lowered production costs, achieved our
G&A synergies targeted, expanded our basin-leading cash
operating margins and delivered free cash flow neutrality ahead of
schedule. Management remains very focused on maintaining our
balance sheet strength and building upon the financial progress
made to-date with continued efforts targeting commercial agreement
negotiations, capital and expense cost reductions, and cycle time
improvements in 2020. Our capital expenditure budget demonstrates
the high-quality assets and execution efficiencies of the Company
in delivering moderated production growth from significantly lower
year-over-year capital spending. As we progress into 2020, we will
continue to monitor commodity prices and incremental development
cost reductions in order to dynamically adjust our level of capital
expenditures as necessary in order to preserve the financial
strength of the company while targeting free cash flow generation.
We anticipate that incremental cash flow generation in 2020 will be
used to pay down debt and reduce financial leverage (which ended
the third quarter of 2019 at a leverage ratio of approximately 1.7
times). Given the differentiation of our business model and the
strong credibility we have achieved through our proven execution,
we believe that our 2020 plan will allow us to deliver upon our
objectives and generate value for our shareholders.”
1. For purposes of calculating three-way floor price, the higher
put value was used
2020 Capital Expenditure
Budget
The Board of Directors has approved an initial capital
expenditure budget for 2020 of approximately $190 - $210 million
based upon an approximate one rig drilling program, with the wells
drilled expected to average approximately 12,000 feet in lateral
length. This capital budget is allocated approximately 95% for
drilling and completions activities and 5% for land capital
requirements, and development activity is concentrated in the
Company’s stacked pay area within the Ohio Marcellus and Utica Dry
gas areas located in Monroe County. The initial capital budget
assumes the drilling of between 17 to 20 gross horizontal shale
wells, the completion of 18 to 22 gross horizontal shale wells and
between 21 to 24 gross horizontal shale wells turned to sales, with
approximately 60% of the capital spend weighted toward the first
half of 2020. The Company anticipates approximately 65% of the
wells drilled to be in the Company’s Ohio Marcellus acreage and
approximately 35% in the Ohio Utica Dry gas acreage area.
Net production volumes for 2020 are expected to be between 570
to 590 MMcfe per day with approximately 80% of 2020 production from
natural gas and approximately 20% from oil and natural gas liquids.
The projected production profile for 2020 remains significantly
above the Company’s firm transportation commitments and provides
multiple options regarding the development activity, while also
allowing the Company to continue to maximize its realized natural
gas price from a balanced portfolio of sales points both in-basin
and out-of-basin.
Guidance
The Company issued the following first quarter and full year
2020 guidance in the table below:
Q1 2020
FY 2020
Production MMcfe/d
585 - 600
570 - 590
% Gas
79% - 81%
79% - 81%
% NGL
11% - 13%
11% - 13%
% Oil
7% - 9%
7% - 9%
Gas Price Differential ($/Mcf)1
$(0.10) - $(0.20)
$(0.20) - $(0.30)
Oil Differential ($/Bbl)1
$(7.75) - $(8.75)
$(7.75) - $(8.75)
NGL Prices (% of WTI)1
30% - 35%
30% - 35%
Cash Production Costs ($/Mcfe)2
$1.25 - $1.35
$1.25 - $1.35
Cash G&A ($mm)
$9 - $11
$33 - $37
CAPEX ($mm)
$190 - $210
1.
Excludes impact of hedges and
cost of firm transportation
2.
Includes lease operating,
transportation, gathering and compression, production and ad
valorem taxes
Cash General and Administrative
Expenses
Cash General and Administrative Expenses, or Cash G&A, 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, 2020
For the Year Ending December
31, 2020
General and administrative expenses,
estimated to be reported
$10,000-$14,000
$39,000 - $46,000
Stock-based compensation expenses
(1,000 - 2,000)
(6,000 - 8,000)
Cash general and administrative
expenses
$9,000 - $12,000
$33,000 - $38,000
Merger-related expenses
(0 - 1,000)
(0 - 1,000)
Cash general and administrative expenses,
excluding merger-related expenses
$9,000-$11,000
$33,000 - $37,000
About Montage Resources
Montage Resources is an exploration and production company with
approximately 218,000 net effective 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, 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,” ”should,” “could,” “believe,”
“anticipate,” “intend,” “estimate,” “expect,” “continue,”
“position,” “potential,” “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 filed with the Securities and
Exchange Commission on March 15, 2019 (the “2018 Annual Report”),
in “Item 1A. Risk Factors” of Montage Resources’ Quarterly Reports
on Form 10-Q 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 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;
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 integration and
transition plans, synergies, cost savings, opportunities,
anticipated future performance, benefits of the transaction and its
impact on Montage Resources’ 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 under the heading “Risk
Factors” in the 2018 Annual Report, in “Item 1A. Risk Factors” of
Montage Resources’ Quarterly Reports on Form 10-Q and in Montage
Resources’ other filings and reports with the Securities and
Exchange Commission. 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 Montage
Resources 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.
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/20200204006043/en/
Montage Resources Corporation Douglas Kris Vice President,
Investor Relations 469-444-1736 dkris@mresources.com
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