Montage Resources Corporation (NYSE:MR) (the “Company” or
“Montage Resources”) today announced its fourth quarter 2018 and
full year 2018 financial and operational results.
Fourth Quarter 2018 Highlights:
- Average net daily production was 404.5
MMcfe per day, consisting of 72% natural gas and 28% liquids.
- Realized an average natural gas price,
before the impact of cash settled derivatives and firm
transportation expenses, of $3.59 per Mcf, a $0.05 per Mcf discount
to the average monthly NYMEX settled natural gas price during the
quarter.
- Realized an average oil price, before
the impact of cash settled derivatives, of $53.10 per barrel, a
$6.87 per barrel discount to the average WTI oil price during the
quarter.
- Realized an average natural gas liquids
(“NGL”) price, before the impact of cash settled derivatives, of
$22.40 per barrel, or approximately 37% of the average WTI oil
price during the quarter.
- Per unit cash production costs
(including lease operating, transportation, gathering and
compression, production and ad valorem taxes) were $1.34 per Mcfe,
including $0.40 per Mcfe in firm transportation expenses.
- Net income for the fourth quarter of
2018 was $36.5 million; Adjusted net income1 for the fourth quarter
of 2018 was $23.6 million; and Adjusted EBITDAX1 for the fourth
quarter of 2018 was $80.7 million.
- The Company commenced drilling 9 gross
(5.7 net) operated wells, commenced completions of 6 gross (3.1
net) operated wells and turned to sales 3 gross (0.8 net) operated
Utica Shale wells.
Full Year 2018 Highlights
- Average net daily production was 343.2
MMcfe per day, consisting of 72% natural gas and 28% liquids.
- Realized an average natural gas price,
before the impact of cash settled derivatives and firm
transportation expenses, of $3.05 per Mcf, a $0.04 per Mcf discount
to the average monthly NYMEX settled natural gas price during the
year.
- Realized an average oil price, before
the impact of cash settled derivatives, of $58.12 per barrel, a
$7.11 per barrel discount to the average WTI oil price during the
year.
- Realized an average NGL price, before
the impact of cash settled derivatives, of $24.59 per barrel, or
approximately 38% of the average WTI oil price during the
year.
- Per unit cash production costs
(including lease operating, transportation, gathering and
compression, production and ad valorem taxes) were $1.41 per Mcfe,
including $0.39 per Mcfe in firm transportation expenses.
- Net income for the year was $18.8
million; Adjusted net income1 for the year was $47.4 million; and
Adjusted EBITDAX1 for the year was $261.6 million.
- Capital expenditures were $250.0
million, including $223.7 million for drilling and completions,
$13.7 million for midstream expenditures, $11.8 million for
land-related expenditures, and $0.8 million for corporate-related
expenditures.
- Proved reserves grew 28% over the
previous year to approximately 1.86 Tcfe at SEC pricing.
1
Non-GAAP measure. See reconciliation for
details
John Reinhart, President and CEO, commented on the Company’s
fourth quarter and full year 2018 results, “The fourth quarter’s
results represent yet another solid performance by the team with
the continued focus on execution and efficiency generating cash
flows above expectations, continued improvement in production and
operating expenses along with strong well performance in all of our
project areas. This level of execution and performance helps to
potentially accelerate our goals related to cash flow generation
while maintaining balance sheet strength.
For the fourth quarter of 2018, the Company was able to achieve
record revenue of $171.2 million, a 64% increase over the fourth
quarter of 2017, while also posting a 51% increase in adjusted
EBITDAX1 over the fourth quarter of 2017, which came in at a new
Company record of $80.7 million. From a capital spending
perspective, the Company illustrated its focus on capital
discipline with the roughly 20% reduction in year over year spend
and it managed its capital expenditure plan consistent with
guidance that was previously provided, ending the year on the
target of approximately $250 million. These achievements highlight
the strength of the portfolio of assets, the demonstration of the
business model to generate positive free cash flow and the ability
to drive value for shareholders.
The industry is clearly faced with a new set of operational and
financial expectations and as we move through 2019 we will execute
on the plan we have created that mirrors our five strategic
priorities and commitment to generating organic free cash flow,
while still moderately growing our production base. Decreasing our
cycle times while continuing to build scale will allow the Company
to enhance its operating margins, lower its cost of capital, be
well positioned in terms of base production and significantly
improve its cost structure. We are looking forward to the continued
integration of the teams and the potential opportunities this
business model can provide.”
1
Non-GAAP measure. See reconciliation for
details
Operational Discussion
The Company’s production for the three and twelve months ended
December 31, 2018 and 2017 is set forth in the following
table:
Three Months Ended Year Ended
December 31, December 31, 2018
2017 2018 2017 Production:
Natural gas (MMcf) 26,657.3 21,178.4
89,965.7 87,404.2 NGLs (Mbbls) 1,010.5 711.0 3,503.1 2,713.7 Oil
(Mbbls) 748.6 539.2 2,378.0 1,622.4
Total (MMcfe) 37,211.9 28,679.7 125,252.3 113,420.8
Average daily production volume: Natural gas (Mcf/d) 289,753
230,201 246,481 239,464 NGLs (Bbls/d) 10,984 7,728 9,598 7,435 Oil
(Bbls/d) 8,137 5,861 6,515 4,445 Total
(MMcfe/d) 404.5 311.7 343.2 310.7
Financial Discussion
Revenue for the three months ended December 31, 2018
totaled $171.2 million, compared to $104.1 million for the three
months ended December 31, 2017. Adjusted Revenue2, which
includes the impact of cash settled derivatives and excludes
brokered natural gas and marketing revenue, totaled $138.7 million
for the three months ended December 31, 2018 compared to
$105.8 million for the three months ended December 31, 2017.
Net Income (Loss) for the three months ended December 31, 2018
was $36.5 million, or $1.81 per share3, compared to ($13.1)
million, or $(0.75) per share3, for the three months ended
December 31, 2017. Adjusted Net Income2 for the three months
ended December 31, 2018 was $23.6 million, or $1.17 per
share3, compared to $5.2 million, or $0.30 per share3, for the
three months ended December 31, 2017. Adjusted EBITDAX2 was
$80.7 million for the three months ended December 31, 2018
compared to $53.5 million for the three months ended
December 31, 2017.
Revenue for the year ended December 31, 2018 totaled $515.1
million, compared to $383.7 million for the year ended
December 31, 2017. Adjusted Revenue2, which includes the
impact of cash settled derivatives and excludes brokered natural
gas and marketing revenue, totaled $471.6 million for the year
ended December 31, 2018 compared to $378.0 million for the
year ended December 31, 2017. Net Income for the year ended
December 31, 2018 was $18.8 million, or $0.94 per share3
compared to a Net Income of $8.5 million or $0.49 per share3 for
the year ended December 31, 2017. Adjusted Net Income2 for the
year ended December 31, 2018 was $47.4 million, or $2.37 per
share3, compared to an Adjusted Net Income $1.5 million, or $0.09
per share3 for the year ended December 31, 2017. Adjusted
EBITDAX2 was $261.6 million for the year ended December 31,
2018 compared to $189.1 million for the year ended
December 31, 2017.
2
Adjusted Revenue, Adjusted Net Income
(Loss) and Adjusted EBITDAX are non-GAAP financial measures. Tables
reconciling Adjusted Revenue, Adjusted Net Income (Loss) and
Adjusted EBITDAX to the most directly comparable GAAP measures can
be found at the end of the financial statements included in this
press release.
3
Retroactively reflects the 15-to-1 reverse
stock split that took place at the close of the merger with Blue
Ridge on February 28, 2019.
Average realized price calculations for the three and twelve
months ended December 31, 2018 and 2017 are set forth in the
table below:
Three Months Ended Year Ended
December 31, December 31, 2018
2017 2018 2017
Average realized price (excluding cash
settled derivatives and firm transportation)
Natural gas ($/Mcf) $ 3.59 $ 2.55 $ 3.05 $ 2.76 NGLs ($/Bbl) 22.40
31.16 24.59 23.62 Oil ($/Bbl) 53.10 49.61 58.12 46.04 Total average
prices ($/Mcfe) 4.25 3.59 3.98 3.35
Average realized price (including cash
settled derivatives, excluding firm transportation)
Natural gas ($/Mcf) $ 3.05 $ 2.81 $ 2.96 $ 2.79 NGLs ($/Bbl) 22.40
27.52 24.32 21.96 Oil ($/Bbl) 46.44 49.61 50.47 46.14 Total average
prices ($/Mcfe) 3.73 3.69 3.77 3.33
Average realized price (including firm
transportation, excluding cash settled derivatives)
Natural gas ($/Mcf) $ 3.03 $ 2.09 $ 2.50 $ 2.31 NGLs ($/Bbl) 22.40
31.16 24.59 23.62 Oil ($/Bbl) 53.10 49.61 58.12 46.04 Total average
prices ($/Mcfe) 3.85 3.25 3.59 3.01
Average realized price (including cash
settled derivatives and firm transportation)
Natural gas ($/Mcf) $ 2.50 $ 2.34 $ 2.41 $ 2.34 NGLs ($/Bbl) 22.40
27.52 24.32 21.96 Oil ($/Bbl) 46.44 49.61 50.47 46.14 Total average
prices ($/Mcfe) 3.33 3.35 3.37 2.99
Per unit cash production costs, which include $0.40 per Mcfe of
firm transportation expense, were $1.34 per Mcfe for the fourth
quarter of 2018 and decreased by 10% compared to the fourth quarter
of 2017. 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 $0.39 per Mcfe of
firm transportation expense, were $1.41 per Mcfe for the year ended
December 31, 2018 and increased by 4% compared to the year
ended December 31, 2017. The Company’s cash production costs
(includes lease operating, transportation, gathering and
compression, production and ad valorem taxes) are shown in the
table below.
General and administrative expense was $11.0 million and $12.3
million for the three months ended December 31, 2018 and 2017,
respectively and is shown in the table below. Cash general and
administrative expense4, which exclude stock-based compensation
expense, were $9.2 million (which includes $1.0 million of Blue
Ridge (as defined below) transaction related costs) and $9.9
million for the three months ended December 31, 2018 and 2017
respectively. General and administrative expense per Mcfe was $0.30
in the three months ended December 31, 2018 compared to $0.43
in the three months ended December 31, 2017. Cash general and
administrative expense4 per Mcfe was $0.25 in the three months
ended December 31, 2018 compared to $0.35 in the three months
ended December 31, 2017.
General and administrative expense was $44.4 million and $44.6
million for the year ended December 31, 2018 and 2017,
respectively and is shown in the table below. Cash general and
administrative expense4, which exclude stock-based compensation
expense, were $36.5 million (which includes $4.0 million of Blue
Ridge (as defined below) transaction related costs) and $35.3
million for the year ended December 31, 2018 and 2017,
respectively. General and administrative expense per Mcfe was $0.35
in the year ended December 31, 2018 compared to $0.39 in the
year ended December 31, 2017. Cash general and administrative
expense4 per Mcfe was $0.29 in the year ended December 31,
2018 compared to $0.31 in the year ended December 31,
2017.
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 Year Ended
December 31, December 31, 2018
2017 2018 2017 Operating expenses
(in thousands): Lease operating $ 6,263 $ 8,582 $ 28,289 $
20,525 Transportation, gathering and compression 40,640 32,124
138,766 124,839 Production and ad valorem taxes 2,915 2,097 10,141
8,490 Depreciation, depletion and amortization 36,091 31,889
134,277 118,818 General and administrative 10,998 12,344 44,389
44,553
Operating expenses per Mcfe: Lease operating $ 0.17 $
0.30 $ 0.23 $ 0.18 Transportation, gathering and compression 1.09
1.12 1.10 1.10 Production and ad valorem taxes 0.08 0.07 0.08 0.07
Depreciation, depletion and amortization 0.97 1.11 1.07 1.05
General and administrative 0.30 0.43 0.35 0.39
Capital Expenditures
Fourth quarter 2018 capital expenditures were $45.8 million,
including $41.3 million for drilling and completions, $0.2 million
for midstream expenditures, $4.2 million for land-related
expenditures, and $0.1 million for corporate-related
expenditures.
For the year ended December 31, 2018 capital expenditures
were $250.0 million, including $223.7 million for drilling and
completions, $13.7 million for midstream expenditures, $11.8
million for land-related expenditures, and $0.8 million for
corporate-related expenditures.
During the fourth quarter of 2018, the Company commenced
drilling 9 gross (5.7 net) operated wells, commenced completions of
6 gross (3.1 net) operated wells and turned to sales 3 gross (0.8
net) operated wells.
During the year ended December 31, 2018, the Company
commenced drilling 26 gross (13.1 net) operated wells, commenced
completions of 31 gross (16.9 net) operated wells and turned to
sales 30 gross (17.6 net) operated wells.
Financial Position and
Liquidity
As of December 31, 2018, the Company’s liquidity was $171.5
million, consisting of $6.0 million in cash and cash equivalents
and $165.5 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 $27.0
million and $32.5 million in outstanding borrowings).
Subsequent to December 31, 2018, the Company amended and
restated its revolving credit facility, increasing the borrowing
base from $225 million to $375 million and extended the maturity
date to approximately five years after the closing of the merger
with Blue Ridge Mountain Resources, Inc. (“Blue Ridge”), which took
place on February 28, 2019. In addition, the Company has reduced
the letters of credit outstanding to approximately $13.5 million.
Further, as of March 8, 2019 the Company borrowed an incremental
$65 million under its revolving credit facility (bringing the
Company’s total borrowings to $97.5 million), which reduced the
available borrowing capacity to $264 million.
Michael Hodges, Executive Vice President and Chief Financial
Officer, commented, “The record level of adjusted EBITDAX generated
in the fourth quarter and strong cash flow growth in the full year
2018 clearly demonstrate the operational and financial momentum of
the Company. These results, when combined with the incremental
financial strength provided by the merger with Blue Ridge, places
Montage in a premier financial position amongst its peers as we
execute on our 2019 development plan. From a pricing perspective,
the gas marketing team continues to generate premium pricing by
leveraging our balanced transportation portfolio through the
utilization of other operator’s excess firm transportation
capacity. As we look to the future of Montage, we believe our low
leverage, ample liquidity and operational flexibility will allow us
to generate significant value for our shareholders going
forward.”
Commodity Derivatives
The Company engages in a number of different commodity trading
program strategies as a risk management tool to attempt to mitigate
the potential negative impact on cash flows caused by price
fluctuations in natural gas, NGL and oil prices. Below is a table
that illustrates the Company’s hedging activities as of
December 31, 2018:
Natural Gas Derivatives
Volume Weighted Average
Description (MMBtu/d) Production Period
Price ($/MMBtu) Natural Gas Swaps: 30,000
January 2019 – March 2019 $ 2.90 90,000 January 2019 – December
2019 $ 2.84
Natural Gas Collars: Ceiling sold price (call)
30,000 October 2019 – December 2019 $ 2.95 Floor sold price (put)
30,000 October 2019 – December 2019 $ 2.65
Natural Gas Three-way
Collars: Floor purchase price (put) 30,000 January 2019 – March
2019 $ 3.00 Ceiling sold price (call) 30,000 January 2019 – March
2019 $ 3.40 Floor sold price (put) 30,000 January 2019 – March 2019
$ 2.50 Floor purchase price (put) 77,500 January 2019 – December
2019 $ 2.72 Ceiling sold price (call) 77,500 January 2019 –
December 2019 $ 3.04 Floor sold price (put) 77,500 January 2019 –
December 2019 $ 2.30 Floor purchase price (put) 50,000 January 2020
– June 2020 $ 2.70 Ceiling sold price (call) 50,000 January 2020 –
June 2020 $ 2.25 Floor sold price (put) 50,000 January 2020 – June
2020 $ 2.95
Natural Gas Call/Put Options: Call sold 30,000
January 2019 – March 2019 $ 3.50 Call sold 30,000 April 2019 –
December 2019 $ 3.00 Call sold 10,000 January 2019 – December 2019
$ 4.75
Basis Swaps: Appalachia - Dominion 12,500 April 2019
– October 2019 $ (0.52 ) Appalachia - Dominion 12,500 April 2020 –
October 2020 $ (0.52 ) Appalachia - Dominion 20,000 January 2020 –
December 2020 $ (0.59 )
Oil Derivatives
Volume Weighted Average
Description (Bbls/d) Production Period
Price ($/Bbl) Oil Swaps: 1,000 January 2019 –
March 2019 $ 61.00
Oil Three-way Collars: Floor purchase
price (put) 2,000 January 2019 – December 2019 $ 50.00 Ceiling sold
price (call) 2,000 January 2019 – December 2019 $ 60.56 Floor sold
price (put) 2,000 January 2019 – December 2019 $ 40.00 Floor
purchase price (put) 2,000 January 2020 – June 2020 $ 62.50 Ceiling
sold price (call) 2,000 January 2020 – June 2020 $ 74.00 Floor sold
price (put) 2,000 January 2020 – June 2020 $ 55.00
Subsequent to the End of the Fourth Quarter:
The below table illustrates the Company’s hedging activities
subsequent to the end of the fourth quarter including hedge
contracts assumed from the merger:
Natural Gas:
Volume Weighted Average
Description (MMbtu/d) Production Period
Price ($/MMbtu) Natural Gas Swaps: 15,000
April 2019 – September 2019 $ 2.79
Natural Gas Collars:
Floor purchase price (put) 50,000 January 2019 – March 2019 $ 3.00
Ceiling sold price (call) 50,000 January 2019 – March 2019 $ 3.52
Floor purchase price (put) 55,000 April 2019 – June 2019 $ 2.51
Ceiling sold price (call) 55,000 April 2019 – June 2019 $ 2.81
Floor purchase price (put) 75,000 July 2019 – September 2019 $ 2.50
Ceiling sold price (call) 75,000 July 2019 – September 2019 $ 2.87
Floor purchase price (put) 35,000 October 2019 – December 2019 $
2.64 Ceiling sold price (call) 35,000 October 2019 – December 2019
$ 2.96 Floor purchase price (put) 30,000 January 2020 – March 2020
$ 2.72 Ceiling sold price (call) 30,000 January 2020 – March 2020 $
3.15 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)
49,000 January 2019 – March 2019 $ 3.15 Ceiling sold price (call)
49,000 January 2019 – March 2019 $ 3.56 Floor sold price (put)
49,000 January 2019 – March 2019 $ 2.63 Floor purchase price (put)
40,000 April 2019 – June 2019 $ 2.65 Ceiling sold price (call)
40,000 April 2019 – June 2019 $ 2.84 Floor sold price (put) 40,000
April 2019 – June 2019 $ 2.30 Floor purchase price (put) 20,000
January 2020 – June 2020 $ 2.70 Ceiling sold price (call) 20,000
January 2020 – June 2020 $ 3.05 Floor sold price (put) 20,000
January 2020 – June 2020 $ 2.25 Floor purchase price (put) 30,000
October 2019 – June 2020 $ 2.90 Ceiling sold price (call) 30,000
October 2019 – June 2020 $ 3.15 Floor sold price (put) 30,000
October 2019 – June 2020 $ 2.50
Natural Gas Call/Put
Options: Call sold 15,000 January 2019 – March 2019 $ 3.50
Basis Swaps: Appalachia - Dominion 17,500 January 2019 –
December 2019 $ (0.50 ) Appalachia - Dominion 20,000 April 2019 –
March 2020 $ (0.39 )
Oil:
Volume Weighted Average
Description (Bbls/d) Production Period
Price ($/Bbl) Oil Swaps: 1,000 July 2019 –
December 2019 $ 58.80 500 January 2020 – December 2020 $ 58.20
Oil Collars: Floor purchase price (put) 1,000 July 2019 –
December 2019 $ 50.00 Ceiling sold price (call) 1,000 July 2019 –
December 2019 $ 66.75 Floor purchase price (put) 500 January 2020 –
December 2020 $ 50.00 Ceiling sold price (call) 500 January 2020 –
December 2020 $ 64.00
NGL:
Volume Weighted Average
Description (Gal/d) Production Period Price
($/Gal) Propane Swaps: 46,200 January 2019 –
March 2019 $ 0.74 14,700 January 2019 – December 2019 $ 0.95
Guidance
The Company is reiterating first quarter and full year 2019
guidance as set forth in the table below:
Q1 2019 FY 2019 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)1,2 $(0.20) -
$(0.30) $(0.20) - $(0.30) Oil Differential ($/Bbl)1 $(6.50) -
$(7.00) $(6.50) - $(7.50) NGL Prices (% of WTI)1 40% - 45% 40% -
50% Cash Production Costs ($/Mcfe)3 $1.55 - $1.65 $1.55 - $1.65
Cash G&A ($mm)4 $8 - $10 $34 - $38 CAPEX ($mm) $375 - $400
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 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 June 12, 2019. To access the phone replay,
dial 877-660-6853 or 201-612-7415 for international callers. The
conference ID is 13687956. 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)
December 31, December 31, 2018
2017 ASSETS CURRENT ASSETS Cash and cash
equivalents $ 5,959 $ 17,224 Accounts receivable 119,332 77,609
Assets held for sale — 206 Other current assets 8,639
12,023 Total current assets 133,930 107,062
PROPERTY AND
EQUIPMENT Oil and natural gas properties, successful efforts
method: Unproved properties 482,475 459,549 Proved oil and gas
properties, net 807,583 647,881 Other property and equipment, net
6,300 6,942 Total property and equipment, net
1,296,358 1,114,372
OTHER NONCURRENT ASSETS Other
assets 3,481 2,093
TOTAL ASSETS $
1,433,769 $ 1,223,527 LIABILITIES
AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts
payable $ 116,735 $ 76,174 Accrued capital expenditures 12,979
10,658 Accrued liabilities 56,909 41,662 Accrued interest payable
21,661 21,100 Total current liabilities 208,284
149,594
NONCURRENT LIABILITIES Debt, net of
unamortized discount and debt issuance costs 497,778 495,021 Credit
facility 32,500 — Asset retirement obligations 7,110 6,029 Other
liabilities 611 529 Total liabilities 746,283 651,173
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, 20,169,063 and 17,516,024 shares issued
and outstanding, respectively1
3,043 2,637 Additional paid in capital 2,065,119 1,967,958 Treasury
stock, shares at cost; 1,747,624 and 992,315 shares, respectively
(3,357 ) (2,096 ) Accumulated deficit (1,377,319 )
(1,396,145 ) Total stockholders' equity 687,486
572,354
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
1,433,769 $ 1,223,527 MONTAGE
RESOURCES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
For the Year Ended December 31, 2018
2017 2016 REVENUES Natural gas, oil and
natural gas liquids sales $ 498,593 $ 380,178 $ 223,015 Brokered
natural gas and marketing revenue 16,552 3,481
12,019 Total revenues 515,145 383,659 235,034
OPERATING
EXPENSES Lease operating 28,289 20,525 9,023 Transportation,
gathering and compression 138,766 124,839 109,226 Production and ad
valorem taxes 10,141 8,490 7,927 Brokered natural gas and marketing
expense 16,886 3,191 12,268 Depreciation, depletion and
amortization 134,277 118,818 92,948 Exploration 49,563 50,208
52,775 General and administrative 44,389 44,553 39,431 Rig
termination and standby — 1 3,846 Impairment of proved oil and gas
properties — — 17,665 Accretion of asset retirement obligations 663
544 391 (Gain) loss on sale of assets (1,815 ) (179 )
6,936 Total operating expenses 421,159 370,990
352,436
OPERATING INCOME (LOSS) 93,986
12,669 (117,402 ) OTHER INCOME
(EXPENSE) Gain (loss) on derivative instruments (21,169 )
45,365 (52,338 ) Interest expense, net (53,990 ) (49,490 ) (50,789
) Gain (loss) on early extinguishment of debt — — 14,489 Other
income (expense) (1 ) (19 ) (149 ) Total other
income (expense), net (75,160 ) (4,144 )
(88,787 )
INCOME (LOSS) BEFORE INCOME TAXES 18,826
8,525 (206,189 ) INCOME TAX BENEFIT
(EXPENSE) — — (546 )
NET INCOME
(LOSS) $ 18,826 $ 8,525 $
(206,735 ) NET INCOME (LOSS) PER COMMON
SHARE1 Basic
$ 0.94 $ 0.49
$ (12.84 ) Diluted
$ 0.94
$ 0.48 $ (12.84 )
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING1
Basic
19,999 17,479 16,096 Diluted
20,087 17,679 16,096
1
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.
Adjusted Revenue
Adjusted revenue is a non-GAAP financial measure. The Company
defines adjusted revenue as follows: total revenues plus net cash
receipts or payments on settled derivative instruments less
brokered natural gas and marketing 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.
Three Months Ended Year Ended
December 31, December 31, $ thousands
2018
2017 2018 2017 Total revenues $
171,208 $ 104,056 $ 515,145 $ 383,659 Net cash receipts (payments)
on derivative instruments (19,261 ) 2,824 (26,985 ) (2,224 )
Brokered natural gas and marketing revenue (13,235 )
(1,052 ) (16,552 ) (3,481 )
Adjusted revenue
$ 138,712 $ 105,828 $
471,608 $ 377,954
Adjusted Net Income
(Loss)
Adjusted net income (loss) represents income (loss) 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) as
determined by GAAP. See the table below for a reconciliation of
adjusted net income (loss) and net income (loss), 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.
Three Months Ended Year Ended
December 31, December 31, $ thousands
2018
2017 2018 2017 Income (loss)
before income taxes, as reported $ 36,489 $ (13,122 ) $ 18,826 $
8,525 (Gain) loss on derivative instruments (2,886 ) (3,980 )
21,169 (45,365 ) Net cash receipts (payments) on derivative
instruments (19,261 ) 2,824 (26,985 ) (2,224 ) Rig termination and
standby — 1 — 1 Dry hole and other 525 1,295 716 3,126 Stock-based
compensation 1,761 2,444 7,891 9,301 Impairment of unproved
properties 6,971 15,916 27,608 28,291 Other (income) expense — — 1
19 (Gain) loss on sale of assets (1 ) (167 )
(1,815 ) (179 ) Income (loss) before income taxes, as
adjusted 23,598 5,211 47,411 1,495
Adjusted net income (loss) $ 23,598 $
5,211 $ 47,411 $ 1,495
Net income (loss) per Common Share Basic
$
1.81 $ (0.75 ) $ 0.94
$ 0.49 Diluted
$ 1.80 $
(0.74 ) $ 0.94 $ 0.48
Adjusted net income (loss) per Common Share Basic
$ 1.17 $ 0.30 $ 2.37
$ 0.09 Diluted
$ 1.16 $
0.29 $ 2.36 $ 0.08
Weighted Average Common Shares Outstanding Basic
20,154 17,506 19,999 17,479 Diluted
20,258 17,771 20,087 17,679
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 Year Ended
December 31, December 31, $ thousands
2018
2017 2018 2017 Net income
(loss) $ 36,489 $ (13,122 ) $ 18,826 $ 8,525 Depreciation,
depletion and amortization 36,091 31,889 134,277 118,818
Exploration expense 13,336 20,695 49,563 50,208 Rig termination and
standby — 1 — 1 Stock-based compensation 1,761 2,444 7,891 9,301
Accretion of asset retirement obligations 177 148 663 544 (Gain)
loss on sale of assets (1 ) (167 ) (1,815 ) (179 ) (Gain) loss on
derivative instruments (2,886 ) (3,980 ) 21,169 (45,365 ) Net cash
receipts (payments) on settled derivatives (19,261 ) 2,824 (26,985
) (2,224 ) Interest expense, net 14,015 12,727 53,990 49,490 Merger
related expenses 1,024 — 4,017 — Other (income) expense —
— 1 19
Adjusted EBITDAX $
80,745 $ 53,459 $ 261,597
$ 189,138
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 Year Ended
December 31, December 31, Guidance
Three Months Year Ending Ending
December 31, $ thousands
2018 2017 2018
2017 March 31, 2019 2019
General and administrative expenses,
estimated to be reported
$ 10,998 $ 12,344 $ 44,389 $ 44,553 $29,000-$38,000 $73,000-$90,000
Stock-based compensation expense (1,761 ) (2,444 )
(7,891 ) (9,301 ) (6,000-8,000) (9,000-12,000)
Cash general and administrative
expenses
$ 9,237 $ 9,900 $ 36,498 $ 35,252 $23,000-$30,000 $64,000-$78,000
Merger related expenses
(1,024 ) — (4,017 ) — (15,000-20,000)
(30,000-40,000)
Cash general and administrative expenses,
excluding merger related expenses
$ 8,213 $ 9,900 $ 32,481 $ 35,252 $8,000-$10,000 $34,000-$38,000
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. 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,” “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 that will be 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/20190312005879/en/
Montage Resources CorporationDouglas Kris, Investor
Relations814-325-2059dkris@mresources.com
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