Montage Resources Corporation (NYSE:MR) (the “Company” or
“Montage Resources”) today announced its third quarter 2019
financial and operational results along with revised full year 2019
guidance. In addition, the Company will be posting an updated
investor presentation to its corporate website.
Third Quarter 2019 Highlights:
- Average net daily production was 621.7 MMcfe per day, above the
high end of the Company’s previously issued guidance range and
above analyst consensus expectations
- Average natural gas equivalent realized price was $2.88 per
Mcfe, including cash settled derivatives and excluding firm
transportation expenses
- Per unit cash production costs (including lease operating,
transportation, gathering and compression, production and ad
valorem taxes) were $1.23 per Mcfe, with the per unit cash
production costs outperforming the midpoint of the Company’s
previously issued guidance by 9% and analyst consensus
expectations
- Net income was $4.3 million; Income from continuing operations
before income taxes was $5.5 million; Adjusted net income1 was
$19.3 million; and Adjusted EBITDAX1 was $83.6 million, above
analyst consensus expectations
- Capital expenditures were $65.4 million, approximately 17%
better than analyst consensus expectations
- The Company remains in a strong liquidity position with the
recent 25% increase in its borrowing base to $500 million, ending
the third quarter with $355 million in liquidity
1
Non-GAAP measure. See
reconciliation for details
John Reinhart, President and CEO, commented on the Company’s
third quarter 2019 results, “During the third quarter, we continued
to demonstrate superior operational execution and prudent financial
decision making as we exhibit a strong track record of what we
believe are repeatable results that differentiate our performance
from others in the Appalachian basin and our small-cap upstream
peers. The quarter-over-quarter reduction in capital spending
driven by a decrease in year to date cycle times of approximately
34% from the 2018 program helps to illustrate our improved capital
efficiency. The drilling team routinely drills a mile a day in dry
gas laterals and exceeds this pace in the Marcellus while
completions activity is averaging approximately nine stages for the
quarter. Our per unit cash production costs are 16% lower as
compared to the third quarter of 2018 and we expect to exceed our
targeted general and administrative expense synergies from the
merger between Eclipse Resources and Blue Ridge Mountain Resources
(excluding merger-related costs) in 2019. These top-tier operating
efficiencies, in addition to outstanding well results, contributed
to the third quarter production outperformance and, when coupled
with cash production costs per unit outperforming expectations,
delivers cash operating margins that we believe are among the best
in the Appalachian Basin.
For the third quarter of 2019, the Company generated revenue of
$163 million, a 25% increase over the third quarter of 2018, while
also recognizing a 25% increase in Adjusted EBITDAX1 over the third
quarter of 2018, despite the weaker commodity price environment.
From a top-line revenue perspective, we believe Montage is
differentiated amongst other Appalachian peers as crude oil
provided approximately 28% of our revenue for the third quarter and
we will continue to focus on the development of our highest
returning liquids-rich locations. Our third quarter results further
highlight the strength of our cash operating margins, which have
expanded to 51% from 48%, or $1.47 per Mcfe, as compared to the
second quarter 2019 despite an approximate 16% decline in natural
gas pricing quarter over quarter. In addition, the Company is
pleased to announce we have updated our production guidance for the
full year 2019 to between 545 and 552 MMcfe per day and decreased
our cash production costs guidance range to between $1.30 to $1.35
per Mcfe.
As we have previously highlighted, we are committed to
maintaining operational flexibility in a dynamic business
environment and will continue to run one gross operated rig through
the remainder of 2019 and into 2020, while continuing to unlock
value with our increased capital efficiency. Our focus remains on
balancing disciplined growth and cash flow generation while
maintaining low leverage and ample liquidity. The natural gas macro
environment we are currently experiencing reinforces the importance
of being a low-cost producer with high quality assets, maintaining
a top performing execution team, and having limited commitments. I
believe we have managed our Company prudently and responsibly with
the third quarter results demonstrating the effectiveness of our
development strategy, the strength of our business, the focus of
our team and the fundamental belief in the long-term prospects for
Montage Resources.”
1
Non-GAAP measure. See reconciliation for details
Operational Discussion
The Company’s production for the three and nine months ended
September 30, 2019 and 2018 is set forth in the following
table:
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Production:
Natural gas (MMcf)
43,289.9
22,979.7
109,613.9
63,308.4
NGLs (Mbbls)
1,401.1
906.4
3,414.9
2,492.6
Oil (Mbbls)
916.2
574.8
2,083.3
1,629.4
Total (MMcfe)
57,193.7
31,866.9
142,603.1
88,040.4
Average daily production
volume:
Natural gas (Mcf/d)
470,542
249,779
401,516
231,899
NGLs (Bbls/d)
15,229
9,852
12,509
9,130
Oil (Bbls/d)
9,959
6,248
7,631
5,968
Total (MMcfe/d)
621.7
346.4
522.4
322.5
Financial Discussion
Revenue for the three months ended September 30, 2019 totaled
$163.3 million, compared to $130.1 million for the three months
ended September 30, 2018. Adjusted Revenue2, which includes the
impact of cash settled derivatives and excludes brokered natural
gas and marketing revenue, totaled $164.8 million for the three
months ended September 30, 2019 compared to $121.8 million for the
three months ended September 30, 2018. Net Income (Loss) for the
three months ended September 30, 2019 was $4.3 million, or $0.12
per share, compared to $4.0 million, or $0.20 per share3, for the
three months ended September 30, 2018. Adjusted Net Income2 for the
three months ended September 30, 2019 was $19.3 million, or $0.54
per share, compared to $14.1 million, or $0.70 per share3, for the
three months ended September 30, 2018. Adjusted EBITDAX2 was $83.6
million for the three months ended September 30, 2019 compared to
$66.8 million for the three months ended September 30, 2018.
2
Adjusted Revenue, Adjusted Net Income
(Loss) and Adjusted EBITDAX are non-GAAP financial measures. Tables
reconciling Adjusted Revenue, Adjusted Net Income (Loss) and
Adjusted EBITDAX to the most directly comparable GAAP measures can
be found at the end of the financial statements included in this
press release.
3
Retroactively reflects the 15-to-1 reverse
stock split that took place at the close of the merger with Blue
Ridge Mountain Resources, Inc. on February 28, 2019.
Average realized price calculations for the three and nine
months ended September 30, 2019 and 2018 are set forth in the table
below:
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Average realized price (excluding cash
settled derivatives and firm transportation)
Natural gas ($/Mcf)
$
2.03
$
2.86
$
2.41
$
2.82
NGLs ($/Bbl)
14.42
27.66
17.82
25.48
Oil ($/Bbl)
49.09
63.24
49.64
60.42
Total average prices ($/Mcfe)
2.68
3.99
3.00
3.87
Average realized price (including cash
settled derivatives, excluding firm transportation)
Natural gas ($/Mcf)
$
2.28
$
2.89
$
2.49
$
2.92
NGLs ($/Bbl)
14.92
27.66
18.19
25.11
Oil ($/Bbl)
49.53
52.67
50.15
52.32
Total average prices ($/Mcfe)
2.88
3.82
3.08
3.78
Average realized price (including firm
transportation, excluding cash settled derivatives)
Natural gas ($/Mcf)
$
1.60
$
2.19
$
1.94
$
2.28
NGLs ($/Bbl)
14.42
27.66
17.82
25.48
Oil ($/Bbl)
49.09
63.24
49.64
60.42
Total average prices ($/Mcfe)
2.35
3.51
2.64
3.48
Average realized price (including cash
settled derivatives and firm transportation)
Natural gas ($/Mcf)
$
1.85
$
2.22
$
2.02
$
2.38
NGLs ($/Bbl)
14.92
27.66
18.19
25.11
Oil ($/Bbl)
49.53
52.67
50.15
52.32
Total average prices ($/Mcfe)
2.56
3.34
2.72
3.39
*rounded to the nearest penny
Per unit cash production costs, which include $0.32 per Mcfe of
firm transportation expense, were $1.23 per Mcfe for the third
quarter of 2019, a decrease of approximately 16% compared to the
third quarter of 2018. 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.
General and administrative expense (including one-time
merger-related expenses) was $14.6 million and $12.9 million for
the three months ended September 30, 2019 and 2018, respectively,
and is shown in the table below. Cash general and administrative
expense4 (excluding merger-related expenses and stock-based
compensation expense) was $10.2 million and $7.8 million for the
three months ended September 30, 2019 and 2018 respectively.
General and administrative expense per Mcfe (including one-time
merger-related expenses) was $0.25 in the three months ended
September 30, 2019 compared to $0.41 in the three months ended
September 30, 2018. Cash general and administrative expense4 per
Mcfe (excluding merger-related expenses and stock-based
compensation expense) declined 25% to $0.18 in the three months
ended September 30, 2019 compared to $0.24 in the three months
ended September 30, 2018.
4
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 September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Operating expenses (in
thousands):
Lease operating
$
11,986
$
5,312
$
29,651
$
22,026
Transportation, gathering and
compression
57,027
39,066
150,065
98,126
Production and ad valorem taxes
1,660
2,604
8,519
7,226
Total cash production costs
$
70,673
$
46,982
$
188,235
$
127,378
Depreciation, depletion, amortization and
accretion
45,456
34,439
113,950
98,672
General and administrative1
14,580
12,937
57,074
33,391
Operating expenses per Mcfe:
Lease operating
$
0.21
$
0.17
$
0.21
$
0.25
Transportation, gathering and
compression
0.99
1.21
1.04
1.11
Production and ad valorem taxes
0.03
0.08
0.06
0.08
Total cash production costs
$
1.23
$
1.46
$
1.31
$
1.44
Depreciation, depletion, amortization and
accretion
0.79
1.08
0.80
1.12
General and administrative2
0.25
0.41
0.40
0.38
1
Includes stock-based compensation
and merger-related expenses of $ 4.4 million and $ 5.2 million for
the three months ended September 30, 2019 and 2018, respectively,
and $ 29.4 million and $ 9.1 million for the nine months ended
September 30, 2019 and 2018, respectively
2
Includes stock-based compensation
and merger-related expenses of $ 0.07 per Mcfe and $ 0.16 per Mcfe
for the three months ended September 30, 2019 and 2018,
respectively, and $ 0.20 per Mcfe and $ 0.10 per Mcfe for the nine
months ended September 30, 2019 and 2018, respectively
Cash Margins
The Company’s cash margins are detailed in the table below:
Three Months Ended
Three Months Ended
September 30, 2019
September 30, 2018
June 30, 2019
(per Mcfe)
Average realized price (including cash
settled derivatives, excluding
firm transportation)
$
2.88
$
3.82
$
2.99
Total cash production costs1
1.23
1.46
1.35
Cash production margin
$
1.65
$
2.36
$
1.64
Cash production margin %
57
%
62
%
55
%
Cash production margin
$
1.65
$
2.36
$
1.64
Cash general and administrative
expenses2
0.18
0.24
0.19
Cash operating margin
$
1.47
$
2.12
$
1.45
Cash operating margin %
51
%
55
%
48
%
Cash operating margin
$
1.47
$
2.12
$
1.45
Interest expense
0.27
0.44
0.31
Corporate cash operating margin3
$
1.20
$
1.68
$
1.14
Corporate cash operating margin %
42
%
44
%
38
%
1
Includes lease operating,
transportation, gathering and compression, production and ad
valorem taxes
2
Cash general & administrative
expense is a Non-GAAP financial measure which excludes non-cash
compensation and merger related expenses, 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 & administrative expense is a
Non-GAAP financial measure which excludes non-cash compensation and
merger related expenses, see reconciliation to the most comparable
GAAP measure under “Cash General and Administrative Expense” in
this press release
Capital Expenditures
Third quarter 2019 capital expenditures were $65.4 million,
including $63.6 million for drilling and completions, $1.4 million
for land-related expenditures, and $0.4 million for
corporate-related expenditures.
During the third quarter of 2019, the Company commenced drilling
4 gross (3.3 net) operated wells, commenced completions of 7 gross
(5.2 net) operated wells and turned to sales 16 gross (13.9 net)
operated wells.
Financial Position and
Liquidity
As of September 30, 2019, the Company’s liquidity was $354.8
million, consisting of $11.5 million in cash and cash equivalents
and $343.3 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 $127.5 million in outstanding borrowings).
Michael Hodges, Executive Vice President and Chief Financial
Officer, commented, “We remain highly focused on maintaining the
strength of our balance sheet. With no debt maturities for almost
four years, a current leverage ratio of approximately 1.7 times5
and with the recent increase of our borrowing base providing
liquidity of approximately $355 million, we believe our superior
financial condition positions us to dynamically respond to changes
in the commodity price environment while still achieving our goal
of generating free cash flow by the end of 2019. From a gas
marketing perspective, the Company has continued to endeavor to
maximize realized pricing through our access to both in basin and
out of basin markets and the optimization of the “commitment free”
equity gas we produce. Finally, we believe our strong hedge book
for the remainder of 2019 and into 2020 provides cash flow support
for the foreseeable future as we execute our development plans. The
benefits of the merger consummated earlier this year have
positioned Montage for success, and we believe the unique
combination of ample liquidity, low leverage, limited operational
commitments and the peer-leading EBITDAX margins leave the Company
well positioned to deliver value to its stakeholders in 2019 and
beyond.”
5
Based upon net debt to pro forma last
twelve months EBITDAX
Commodity Derivatives
The Company engages in a number of different commodity trading
program strategies as a risk management tool to attempt to mitigate
the potential negative impact on cash flows caused by price
fluctuations in natural gas, NGL and oil prices. Below is a table
that illustrates the Company’s hedging activities as of September
30, 2019:
Natural Gas Derivatives:
Description
Volume (MMBtu/d)
Production Period
Weighted Average Price
($/MMBtu)
Natural Gas Swaps:
120,000
October 2019 – December 2019
$
2.80
50,000
January 2020 – December 2020
$
2.67
20,000
January 2020 – March 2020
$
2.80
50,000
January 2020 – June 2020
$
2.70
20,000
April 2020 – June 2020
$
2.75
30,000
July 2020 – December 2020
$
2.60
Natural Gas Collars:
Floor purchase price (put)
95,000
October 2019 – December 2019
$
2.60
Ceiling sold price (call)
95,000
October 2019 – December 2019
$
2.91
Floor purchase price (put)
50,000
January 2020 – December 2020
$
2.49
Ceiling sold price (call)
50,000
January 2020 – December 2020
$
2.88
Floor purchase price (put)
30,000
January 2020 – March 2020
$
2.65
Ceiling sold price (call)
30,000
January 2020 – March 2020
$
2.98
Floor purchase price (put)
15,000
April 2020 – June 2020
$
2.50
Ceiling sold price (call)
15,000
April 2020 – June 2020
$
2.80
Natural Gas Three-way Collars:
Floor purchase price (put)
77,500
October 2019 – December 2019
$
2.72
Floor sold price (put)
77,500
October 2019 – December 2019
$
2.30
Ceiling sold price (call)
77,500
October 2019 – December 2019
$
3.04
Floor purchase price (put)
30,000
January 2020 – December 2020
$
2.70
Floor sold price (put)
30,000
January 2020 – December 2020
$
2.40
Ceiling sold price (call)
30,000
January 2020 – December 2020
$
3.05
Floor purchase price (put)
30,000
January 2020 – March 2020
$
2.72
Floor sold price (put)
30,000
January 2020 – March 2020
$
2.25
Ceiling sold price (call)
30,000
January 2020 – March 2020
$
3.15
Floor purchase price (put)
20,000
January 2020 – June 2020
$
2.70
Floor sold price (put)
20,000
January 2020 – June 2020
$
2.25
Ceiling sold price (call)
20,000
January 2020 – June 2020
$
3.05
Floor purchase price (put)
30,000
October 2019 – June 2020
$
2.90
Floor sold price (put)
30,000
October 2019 – June 2020
$
2.50
Ceiling sold price (call)
30,000
October 2019 – June 2020
$
3.15
Natural Gas Call/Put Options:
Ceiling sold price (call)
40,000
October 2019 – December 2019
$
3.44
Floor sold price (put)
50,000
January 2020 – December 2020
$
2.30
Floor sold price (put)
50,000
January 2020 – June 2020
$
2.25
Swaption sold price (call)
50,000
January 2021 – December 2021
$
2.75
Swaption sold price (call)
50,000
January 2022 – December 2022
$
3.00
Basis Swaps:
Appalachia - Dominion
12,500
October 2019
$
(0.52
)
Appalachia - Dominion
12,500
April 2020 – October 2020
$
(0.52
)
Appalachia - Dominion
20,000
January 2020 – December 2020
$
(0.59
)
Appalachia - Dominion
20,000
October 2019 – March 2020
$
(0.39
)
Appalachia - Dominion
17,500
October 2019 – December 2019
$
(0.50
)
Oil Derivatives:
Description
Volume (Bbls/d)
Production Period
Weighted Average Price
($/Bbl)
Oil Swaps:
1,500
October 2019 – December 2019
$
59.18
1,000
January 2020 – December 2020
$
58.60
1,000
July 2020 – December 2020
$
56.53
Oil Collars:
Floor purchase price (put)
1,500
October 2019 – December 2019
$
51.67
Ceiling sold price (call)
1,500
October 2019 – December 2019
$
65.92
Floor purchase price (put)
1,000
January 2020 – December 2020
$
51.50
Ceiling sold price (call)
1,000
January 2020 – December 2020
$
64.25
Floor purchase price (put)
500
July 2020 – December 2020
$
52.00
Ceiling sold price (call)
500
July 2020 – December 2020
$
60.00
Floor purchase price (put)
500
October 2019 – March 2020
$
60.00
Ceiling sold price (call)
500
October 2019 – March 2020
$
67.00
Oil Three-way Collars:
Floor purchase price (put)
2,000
October 2019 – December 2019
$
50.00
Floor sold price (put)
2,000
October 2019 – December 2019
$
40.00
Ceiling sold price (call)
2,000
October 2019 – December 2019
$
60.56
Floor purchase price (put)
2,000
January 2020 – June 2020
$
62.50
Floor sold price (put)
2,000
January 2020 – June 2020
$
55.00
Ceiling sold price (call)
2,000
January 2020 – June 2020
$
74.00
Oil Call/Put Options:
Swaption sold price (call)
500
January 2021 – December 2021
$
56.80
NGL Derivatives:
Description
Volume (Bbls/d)
Production Period
Weighted Average Price
($/Bbl)
Propane Swaps:
350
October 2019 – December 2019
$
39.90
Subsequent to the End of the Third Quarter:
The below table illustrates the Company’s hedging activities
subsequent to the end of the third quarter 2019:
Natural Gas Derivatives:
Description
Volume (MMBtu/d)
Production Period
Weighted Average Price
($/MMBtu)
Natural Gas Swaps:
30,000
January 2020 – June 2020
$
2.62
25,000
January 2020 – March 2021
$
2.60
20,000
July 2020 – March 2021
$
2.58
Natural Gas Three-way Collars:
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
Oil Derivatives:
Description
Volume (Bbls/d)
Production Period
Weighted Average Price
($/Bbl)
Oil Swaps:
500
January 2020 – December 2020
$
54.00
250
July 2020 – March 2021
$
53.20
250
January 2021 – March 2021
$
53.00
Oil Call/Put Options:
Floor sold price (put)
500
January 2020 – December 2020
$
53.00
Ceiling sold price (call)
500
January 2020 – December 2020
$
64.50
Floor sold price (put)
500
July 2020 – December 2020
$
45.00
Guidance
The Company is announcing updated full year 2019 guidance
(changes in italics) as set forth in the table below:
FY 2019
Production MMcfe/d
545 - 552
% Gas
74% - 78%
% NGL
12% - 15%
% Oil
9% - 11%
Gas Price Differential ($/Mcf)1,2
$(0.20) - $(0.30)
Oil Differential ($/Bbl)1
$(7.25) - $(7.75)
NGL Prices (% of WTI)1
30% - 35%
Cash Production Costs ($/Mcfe)3
$1.30 - $1.35
Cash G&A ($mm)4
$36 - $38
CAPEX ($mm)
$345 - $370
1
Excludes impact of hedges
2
Excludes the cost of firm
transportation
3
Includes lease operating,
transportation, gathering and compression, production and ad
valorem taxes
4
Non-GAAP financial measure which
excludes non-cash compensation and merger related expenses, 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 third quarter
financial and operational results is scheduled for Friday, November
8, 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 Third Quarter 2019 Earnings Call. A
replay of the call will be available through January 8, 2020. To
access the phone replay, dial 877-660-6853 or 201-612-7415 for
international callers. The conference ID is 13695725. 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)
September 30, 2019
December 31, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
11,531
$
5,959
Accounts receivable
77,154
119,332
Assets held for sale
1,485
—
Other current assets
35,239
8,639
Total current assets
125,409
133,930
PROPERTY AND EQUIPMENT
Oil and natural gas properties, successful
efforts method:
Unproved properties
520,941
482,475
Proved oil and gas properties, net
1,210,876
807,583
Other property and equipment, net
12,349
6,300
Total property and equipment, net
1,744,166
1,296,358
OTHER NONCURRENT ASSETS
Other assets
9,278
3,481
Operating lease right-of-use assets
42,936
—
Assets held for sale
8,724
—
TOTAL ASSETS
$
1,930,513
$
1,433,769
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable
$
122,141
$
116,735
Accrued capital expenditures
51,785
12,979
Accrued liabilities
52,081
56,909
Accrued interest payable
11,137
21,661
Liabilities associated with assets held
for sale
4,568
—
Operating lease liability
12,889
—
Total current liabilities
254,601
208,284
NONCURRENT LIABILITIES
Debt, net of unamortized discount and debt
issuance costs
499,848
497,778
Revolving credit facility
127,500
32,500
Asset retirement obligations
27,169
7,110
Other liabilities
2,296
611
Operating lease liability
30,185
—
Liabilities associated with assets held
for sale
6,900
—
Total liabilities
948,499
746,283
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, 35,756,088
and 20,169,063 shares issued and
outstanding, respectively
382
3,043
Additional paid in capital
2,350,072
2,065,119
Treasury stock, shares at cost; 2,488,525
and 1,747,624 shares, respectively
(8,819
)
(3,357
)
Accumulated deficit
(1,359,621
)
(1,377,319
)
Total stockholders’ equity
982,014
687,486
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
$
1,930,513
$
1,433,769
MONTAGE RESOURCES
CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share
data)
(Unaudited)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2019
2018
2019
2018
REVENUES
Natural gas, oil and natural gas liquids
sales
$
153,021
$
127,179
$
428,278
$
340,620
Brokered natural gas and marketing
revenue
10,228
2,944
31,747
3,318
Other revenue
46
—
307
—
Total revenues
163,295
130,123
460,332
343,938
OPERATING EXPENSES
Lease operating
11,986
5,312
29,651
22,026
Transportation, gathering and
compression
57,027
39,066
150,065
98,126
Production and ad valorem taxes
1,660
2,604
8,519
7,226
Brokered natural gas and marketing
expense
10,574
3,237
32,017
3,715
Depreciation, depletion, amortization and
accretion
45,456
34,439
113,950
98,672
Exploration
16,621
11,328
48,602
36,227
General and administrative
14,580
12,937
57,074
33,391
Rig termination and standby
1,221
—
1,221
—
(Gain) loss on sale of assets
(733
)
6
(731
)
(1,814
)
Other expense
2
—
40
—
Total operating expenses
158,394
108,929
440,408
297,569
OPERATING INCOME
4,901
21,194
19,924
46,369
OTHER INCOME (EXPENSE)
Gain (loss) on derivative instruments
15,812
(3,263
)
40,620
(24,055
)
Interest expense, net
(15,192
)
(13,932
)
(44,140
)
(39,975
)
Other income (expense)
—
(1
)
8
(1
)
Total other income (expense), net
620
(17,196
)
(3,512
)
(64,031
)
INCOME (LOSS) FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES
5,521
3,998
16,412
(17,662
)
Income tax benefit (expense)
—
—
—
—
INCOME (LOSS) FROM CONTINUING
OPERATIONS
5,521
3,998
16,412
(17,662
)
Income (loss) from discontinued
operations, net of income tax
(1,237
)
—
1,286
—
NET INCOME (LOSS)
$
4,284
$
3,998
$
17,698
$
(17,662
)
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK
Basic:
Weighted average common stock
outstanding
35,684
20,144
32,343
19,947
Income (loss) from continuing
operations
$
0.15
$
0.20
$
0.51
$
(0.89
)
Income (loss) from discontinued
operations
(0.03
)
—
0.04
—
Net income (loss)
$
0.12
$
0.20
$
0.55
$
(0.89
)
Diluted:
Weighted average common stock
outstanding
35,697
20,170
32,471
19,947
Income (loss) from continuing
operations
$
0.15
$
0.20
$
0.51
$
(0.89
)
Income (loss) from discontinued
operations
(0.03
)
—
0.04
—
Net income (loss)
$
0.12
$
0.20
$
0.55
$
(0.89
)
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 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 nine months
ended September 30, 2019 and 2018.
Three Months Ended September
30,
Nine Months Ended September
30,
$ thousands
2019
2018
2019
2018
Total revenues
$
163,295
$
130,123
$
460,332
$
343,938
Net cash receipts (payments) on derivative
instruments
11,818
(5,377
)
11,072
(7,724
)
Brokered natural gas and marketing
revenue
(10,228
)
(2,944
)
(31,747
)
(3,318
)
Other revenue
(46
)
—
(307
)
—
Adjusted revenue
$
164,839
$
121,802
$
439,350
$
332,896
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, which
retroactively reflects the 15-to-1 reverse stock split that took
place at the close of the merger with Blue Ridge on February 28,
2019 for the three and nine months ended September 30, 2019 and
2018.
Three Months Ended September
30,
Nine Months Ended September
30,
$ thousands
2019
2018
2019
2018
Income (loss) from continuing operations
before income taxes, as
reported
$
5,521
$
3,998
$
16,412
$
(17,662
)
(Gain) loss on derivative instruments
(15,812
)
3,263
(40,620
)
24,055
Net cash receipts (payments) on settled
derivatives
11,818
(5,377
)
11,072
(7,724
)
Dry hole and other
—
93
163
189
Stock-based compensation
1,061
2,171
7,614
6,131
Impairment of unproved properties
14,114
6,971
36,157
20,638
(Gain) loss on sale of assets
(733
)
6
(731
)
(1,814
)
Merger-related expenses
3,291
2,993
21,812
2,993
Income before income taxes, as
adjusted
19,260
14,118
51,879
26,806
Adjusted net income
$
19,260
$
14,118
$
51,879
$
26,806
Net income (loss) per Common
Share
Basic
$
0.12
$
0.20
$
0.55
$
(0.89
)
Diluted
$
0.12
$
0.20
$
0.55
$
(0.89
)
Adjusted net income per Common
Share
Basic
$
0.54
$
0.70
$
1.60
$
1.34
Diluted
$
0.54
$
0.70
$
1.60
$
1.34
Weighted Average Common Shares
Outstanding
Basic
35,684
20,144
32,343
19,947
Diluted
35,697
20,170
32,471
20,030
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; income taxes; impairments; depreciation, depletion and
amortization (“DD&A”); gain (loss) on derivative instruments;
net cash receipts (payments on settled derivative instruments, and
premiums (paid) 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 September
30,
Nine Months Ended September
30,
$ thousands
2019
2018
2019
2018
Net income (loss)
$
4,284
$
3,998
$
17,698
$
(17,662
)
Depreciation, depletion, amortization and
accretion
45,456
34,439
113,950
98,672
Exploration expense
16,621
11,328
48,602
36,227
Rig termination and standby
1,221
—
1,221
—
Stock-based compensation
1,061
2,171
7,614
6,131
(Gain) loss on sale of assets
(733
)
6
(731
)
(1,814
)
(Gain) loss on derivative instruments
(15,812
)
3,263
(40,620
)
24,055
Net cash receipts (payments) on settled
derivatives
11,818
(5,377
)
11,072
(7,724
)
Interest expense, net
15,192
13,932
44,140
39,975
Other income (expense)
—
1
(8
)
1
Merger-related expenses
3,291
2,993
21,812
2,993
Income (loss) from discontinued
operations
1,237
—
(1,286
)
—
Adjusted EBITDAX
$
83,636
$
66,754
$
223,464
$
180,854
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.
Three Months Ended September
30,
Guidance
$ thousands
2019
2018
Year Ending December 31,
2019
General and administrative expenses,
estimated to be reported
$
14,580
$
12,937
$68,000-$76,000
Stock-based compensation
(1,061
)
(2,171
)
(8,000-10,000)
Cash general and administrative
expenses
$
13,519
$
10,766
$60,000-$66,000
Merger-related expenses
(3,291
)
(2,993
)
(24,000-28,000)
Cash general and administrative expenses,
excluding merger related expenses
$
10,228
$
7,773
$36,000-$38,000
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,” “committed,” “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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107006021/en/
Montage Resources Corporation Douglas Kris, Investor Relations
469-444-1736 dkris@mresources.com
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