false 0001600470 0001600470 2020-05-04 2020-05-04

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 4, 2020

 

Montage Resources Corporation

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware

001-36511

46-4812998

(State or Other Jurisdiction

of Incorporation)

(Commission File Number)

(IRS Employer

Identification No.)

 

 

 

122 West John Carpenter Freeway, Suite 300

Irving, Texas

 

75039

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (469) 444-1647

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $0.01 Per Share

 

MR

 

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

Item 1.01Entry into a Material Definitive Agreement.

 

On May 4, 2020, Montage Resources Corporation (the “Company”) entered into the Third Amendment to Third Amended and Restated Credit Agreement (the “Amendment”), by and among the Company, as borrower, Bank of Montreal, as administrative agent (the “Administrative Agent”), and each of the lenders party thereto.

 

The Amendment amends the Third Amended and Restated Credit Agreement, dated as of February 28, 2019, by and among the Company, the Administrative Agent and each of the lenders party thereto (as amended, the “Credit Agreement”), to, among other things, (i) increase the Applicable Margin by 0.25% and (ii) add anti-cash hoarding provisions that generally limit the amount of Available Cash held by the Company and its Restricted Subsidiaries to $40 million.

 

The Amendment also evidences the April 1, 2020 scheduled redetermination of the Borrowing Base under the Credit Agreement. Pursuant to this scheduled redetermination, the Borrowing Base was reduced from $500 million to $475 million. This new Borrowing Base will remain the Borrowing Base under the Credit Agreement until otherwise redetermined or adjusted in accordance with the terms of the Credit Agreement.

 

The description of the Amendment set forth above does not purport to be complete and is qualified in its entirety by reference to the Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. Capitalized terms used and not otherwise defined in this Item 1.01 have the respective meanings given them in the Credit Agreement.

 

Item 2.02Results of Operations and Financial Condition.

 

On May 7, 2020, the Company issued a press release, a copy of which is attached hereto as Exhibit 99.1, announcing its financial and operational results for the first quarter 2020.

 

Item 7.01Regulation FD Disclosure.

 

On May 7, 2020, the Company posted an updated corporate presentation in the Investor Center section of the Company’s website at: www.montageresources.com.

 

In accordance with General Instruction B.2. of Form 8-K, the information in Items 2.02 and 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that section, and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act unless specifically identified therein as being incorporated therein by reference.

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit

Number

 

Description

10.1

 

Third Amendment to Third Amended and Restated Credit Agreement, dated as of May 4, 2020, by and among Montage Resources Corporation, as borrower, Bank of Montreal, as administrative agent, and each of the lenders party thereto.

99.1

 

Press Release, dated May 7, 2020.

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

MONTAGE RESOURCES CORPORATION

 

 

 

 

 

 

 

 

Date: May 7, 2020

 

By:

/s/ Paul M. Johnston

 

 

Name:

Paul M. Johnston

 

 

Title:

Executive Vice President, General Counsel and

Corporate Secretary

 

 

 

Exhibit 10.1

Execution Version

 

THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

dated as of May 4, 2020

among

MONTAGE RESOURCES CORPORATION,
as Borrower,

BANK OF MONTREAL,
as Administrative Agent,

and

the Lenders Party Hereto

 

 

 

 

 

THIRD AMENDMENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT

THIS THIRD AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) dated as of May 4, 2020, is among MONTAGE RESOURCES CORPORATION, a Delaware corporation, the Lenders party hereto, and BANK OF MONTREAL, as Administrative Agent.

R E C I T A L S

A.

The Borrower, the Administrative Agent and the Lenders from time to time parties thereto are parties to that certain Third Amended and Restated Credit Agreement dated as of February 28, 2019, (as amended by that certain First Amendment to Third Amended and Restated Credit Agreement, dated as of September 19, 2019, as amended by that certain Second Amendment to Third Amended and Restated Credit Agreement, dated as of November 11, 2019 and as the same may be further amended, restated, amended and restated, supplemented or modified from time to time, the “Credit Agreement”), pursuant to which the Lenders have made certain credit available to and on behalf of the Borrower.

B.

The Borrower has requested that the Administrative Agent and the Lenders amend, and the Administrative Agent and the Lenders party hereto have agreed to amend, the Credit Agreement as herein set forth.

C.

Section 2.07 provides that the Borrowing Base shall be redetermined from time to time pursuant to Scheduled Redeterminations.

D.

Now, therefore, to induce the Administrative Agent and the Lenders to enter into this Amendment and in consideration of the premises and the mutual covenants herein contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, which include the Required Lenders, agree as follows:

Section 1.Defined Terms.  Each capitalized term used herein but not otherwise defined herein has the meaning given such term in the Credit Agreement, as amended by this Amendment.  Unless otherwise indicated, all annex, article and section references in this Amendment refer to annexes, articles or sections of the Credit Agreement, as applicable.

Section 2.Amendments to the Credit Agreement.

(a)Amendment to Section 1.02.  Section 1.02 is hereby amended as follows:

(i)The following defined term is amended and restated to read in its entirety as follows:

“Applicable Margin” means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the Commitment Fee Rate, as the case may be, the rate per annum set forth in the Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization Percentage then in effect:

Borrowing Base Utilization Grid

Borrowing Base Utilization Percentage

< 25%

> 25% < 50%

> 50% < 75%

> 75% < 90%

> 90%

Eurodollar Loans

2.000%

2.250%

2.500%

2.750%

3.000%

ABR Loans

1.000%

1.250%

1.500%

1.750%

2.000%

Commitment Fee Rate

0.375%

0.375%

0.500%

0.500%

0.500%

 

 

Each change in the Applicable Margin shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change; provided that if at any time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), then the “Applicable Margin” means the rate per annum set forth on the grid when the Borrowing Base Utilization Percentage is at its highest level until such Reserve Report is delivered.

 

(ii)The following defined terms are added in appropriate alphabetical order to read in their entirety as follows:

“Available Cash” means, at any time, the aggregate amount of (a) cash and (b) Investments described in Section 9.05(c), (d), (e), (f), (g), and (h), in each case held by the Borrower and its Restricted Subsidiaries and excluding (i) Cash Collateral that is Cash Collateralizing obligations under Section 2.08 or Section 2.09, (ii) any outstanding checks and electronic funds transfers, (iii) any cash set aside to pay royalty obligations, working interest obligations, production payments, suspense payments and severance taxes of the Borrower or any Restricted Subsidiary then due and owing to third parties and for which the Borrower or such Restricted Subsidiary has issued checks or has initiated electronic funds transfers (or will issue checks or will initiate electronic funds transfers within three (3) Business Days in order to make such payments) and (iv) any cash set aside to pay payroll, payroll taxes, other taxes, employee wage and benefit payments and trust and fiduciary obligations of the Borrower or any Restricted Subsidiary then due and owing and for which the Borrower or such Restricted Subsidiary has issued checks or has initiated electronic funds transfers (or will issue checks or will initiate electronic funds transfers within three (3) Business Days in order to make such payments).

 

“Required Prepayment Amount” has the meaning assigned to such term in Section 3.04(c)(v)(B).

(b)Amendments to Section 3.04(c).  Section 3.04(c) is hereby amended as follows:

(i)Section 3.04(c)(v) is relettered as Section 3.04(vi).

(ii)Section 3.04(c)(vi) is relettered as Section 3.04(vii).

(iii)A new Section 3.04(c)(v) is added to read in its entirety as follows:

(v)If, at the end of any Business Day, (A) there is Revolving Credit Exposure, (B) Available Cash exceeds $40,000,000 (such excess, the “Required Prepayment Amount”) and (C) Available Cash exceeded $40,000,000 at the end of each of the five (5) prior consecutive Business Days, then the Borrower shall, no later than the second Business Day thereafter, (I) prepay the Borrowings in an aggregate principal amount equal to the lesser of the Required Prepayment Amount and the amount of Borrowings then outstanding and (II) if a Default then exists and any Revolving Credit Exposure remains after prepaying all of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to the remaining portion of the Required Prepayment Amount to be held as Cash Collateral as provided in Section 2.08(j), in each case to the extent any such Required Prepayment Amount remains on the date such prepayment is required to be made.

(c)Amendments to Section 6.02.  Section 6.02 is hereby amended as follows:

(i)Section 6.02(c) is relettered as Section 6.02(d).

(ii)A new Section 6.02(c) is added to read in its entirety as follows:

 

2

 

 

(c)At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, Available Cash does not exceed $40,000,000.

 

(iii)The phrase “Section 6.02(a) and (b)” in the last sentence at the end of such Section 6.02 is replaced with the phrase “Section 6.02(a), (b) and (c)”.

Section 3.Redetermination of the Borrowing Base.  Pursuant to Section 2.07, the Administrative Agent and the Required Lenders have determined that the Borrowing Base shall be decreased to $475,000,000, which redetermination is effective as of the Amendment Effective Date.  From and after the Amendment Effective Date, such amount shall remain the Borrowing Base until otherwise redetermined or adjusted in accordance with the Credit Agreement.  This Amendment constitutes the New Borrowing Base Notice and the redetermination of the Borrowing Base set forth herein constitutes the April 1, 2020 Scheduled Redetermination. The Borrower hereby confirms receipt of the New Borrowing Base Notice pursuant to Section 2.07(d).

Section 4.Conditions Precedent.  This Amendment shall become effective on the date when each of the following conditions is satisfied (or waived in accordance with Section 12.02):

(a)The Administrative Agent shall have received from Lenders constituting the Required Lenders, the Administrative Agent, the Borrower and each Guarantor counterparts (in such number as may be reasonably requested by the Administrative Agent) of this Amendment signed on behalf of such Person.

(b)The Borrower shall have paid to the Administrative Agent all fees and other amounts agreed in writing and due and payable on or prior to the Amendment Effective Date, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower under the Credit Agreement.

(c)The Administrative Agent shall have received duly executed mortgages or amendments to existing mortgages (in such number as may be requested by the Administrative Agent) such that the Administrative Agent shall be satisfied that such Security Instruments create first priority, perfected Liens (subject only to Excepted Liens identified in clauses (a) to (d), (f), (i) and (j) of the definition thereof, but subject to the provisos at the end of such definition) on at least 85% of the total value of the Proved Reserves of the Borrower and its Restricted Subsidiaries evaluated in the most recently delivered Reserve Report.

(d)The Administrative Agent shall have received title information as the Administrative Agent may require satisfactory to the Administrative Agent setting forth the status of title to at least 85% of the value of the Proved Reserves of the Borrower and its Restricted Subsidiaries evaluated in the most recently delivered Reserve Report.

(e)Both before and immediately after giving effect to this Amendment, no Default, Event of Default or Borrowing Base Deficiency shall have occurred and be continuing.  

Section 5.Miscellaneous.

(a)Confirmation.  The provisions of the Credit Agreement, as amended by this Amendment, remain in full force and effect following the effectiveness of this Amendment. Neither the execution by the Administrative Agent or the Lenders of this Amendment, nor any other act or omission by the Administrative Agent or the Lenders or their respective officers in connection herewith, shall be deemed a waiver by the Administrative Agent or the Lenders of any defaults which may exist or which may

 

3

 

 

occur in the future under the Credit Agreement and/or the other Loan Documents, or any future defaults of the same provisions waived or amended hereunder (collectively “Violations”).  Similarly, nothing contained in this letter shall directly or indirectly in any way whatsoever either: (i) impair, prejudice or otherwise adversely affect the Administrative Agent’s or any of the Lenders’ right at any time to exercise any right, privilege or remedy in connection with the Loan Documents with respect to any Violations, (ii) amend or alter any provision of the Credit Agreement, the other Loan Documents, or any other contract or instrument, except as expressly set forth herein, or (iii) constitute any course of dealing or other basis for altering any obligation of the Borrower or any right, privilege or remedy of the Administrative Agent or the Lenders under the Credit Agreement, the other Loan Documents, or any other contract or instrument.  Nothing in this letter shall be construed to be a waiver by the Administrative Agent or the Lenders of any Violations.

(b)Ratification and Affirmation; Representations and Warranties.  Each of the Borrower and each Guarantor hereby:

(i)acknowledges the terms of this Amendment,

(ii)ratifies and affirms their respective obligations, and acknowledges their respective continued liability, under each Loan Document to which it is a party and agrees that each Loan Document to which it is a party remains in full force and effect as expressly amended hereby, and

(iii)represents and warrants to the Lenders that as of the date hereof, immediately after giving effect to the terms of this Amendment, all of the Borrower’s and such Guarantor’s, as applicable, respective representations and warranties contained in each Loan Document to which it is a party are true and correct in all material respects, except that (A) to the extent any such representations and warranties are expressly limited to an earlier date, as of the date hereof, after giving effect to the terms of this Amendment, such representation and warranty continues to be true and correct in all material respects as of such specified earlier date and (B) to the extent that any such representation and warranty is qualified by materiality, such representation and warranty (as so qualified) is true and correct in all respects.

(c)Counterparts.  This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page to this Amendment by facsimile transmission or other electronic transmission (e.g., .pdf) shall be effective as delivery of a manually executed counterpart hereof.

(d)NO ORAL AGREEMENT.  THIS AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

(e)GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

(f)Payment of Expenses.  In accordance with Section 12.03, the Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket expenses incurred in connection with this Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees, charges and disbursements of one counsel to the Administrative Agent.

 

4

 

 

(g)Severability.  Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

(h)Successors and Assigns.  The provisions of this Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

(i)Jurisdiction; Venue; Consent to Service of Process; Waiver of Jury Trial.  The express terms of Section 12.09(b), (c) and (d) are hereby incorporated by reference, mutatis mutandis.

(j)Loan Document.  This Amendment is a Loan Document.

[Signature Pages Follow]

 

 

5

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the date first written above.

BORROWER

MONTAGE RESOURCES CORPORATION

 

 

 

 

 

By:/s/ Michael L. Hodges

 

Name:Michael L. Hodges

 

Title:Executive Vice President and Chief Financial Officer

 

 

 

 

GUARANTORS:

ECLIPSE RESOURCES I, LP

 

ECLIPSE GP, LLC

 

ECLIPSE RESOURCES – OHIO, LLC

 

ECLIPSE RESOURCES OPERATING, LLC

 

BUCKEYE MINERALS & ROYALTIES, LLC

 

ECLIPSE RESOURCES MIDSTREAM, LP

 

ECLIPSE RESOURCES MARKETING, LP

 

ECLIPSE RESOURCES–PA, LP

 

BLUE RIDGE MOUNTAIN RESOURCES, INC.

 

BAKKEN HUNTER, LLC

 

TRIAD HUNTER, LLC

 

HUNTER REAL ESTATE, LLC

 

VIKING INTERNATIONAL RESOURCES CO., INC.

 

 

 

 

 

By:/s/ Michael L. Hodges

 

Name:Michael L. Hodges

 

Title:Executive Vice President and Chief Financial Officer

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

BANK OF MONTREAL, as Administrative Agent

 

 

 

 

 

By:/s/ Kevin Utsey

 

Name:Kevin Utsey

 

Title:Managing Director

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

BMO HARRIS FINANCING, INC., as a Lender

 

 

 

 

 

By:/s/ Kevin Utsey

 

Name:Kevin Utsey

 

Title:Managing Director

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

KEYBANK NATIONAL ASSOCIATION, as a Lender

 

 

 

 

 

By:/s/ George E. McKean

 

Name:George E. McKean

 

Title:Senior Vice President

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

BARCLAYS BANK PLC, as a Lender

 

 

 

 

 

By:/s/ Sydney G. Dennis

 

Name:Sydney G. Dennis

 

Title:Director

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

CITIBANK, N.A., as a Lender

 

 

 

 

 

By:/s/ Phil Ballard

 

Name:Phil Ballard

 

Title:Vice President

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

CITIZENS BANK, N.A., as a Lender

 

 

 

 

 

By:/s/ David Baron

 

Name:David Baron

 

Title:Vice President

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

ROYAL BANK OF CANADA, as a Lender

 

 

 

 

 

By:/s/ Don J. McKinnerney

 

Name:Don J. McKinnerney

 

Title:Authorized Signatory

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

CIT BANK, N.A., as a Lender

 

 

 

 

 

By:/s/ John Feeley

 

Name:John Feeley

 

Title:Director

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

TRUIST BANK, formerly Branch Banking & Trust, as a Lender

 

 

 

 

 

By:/s/ Benjamin L. Brown

 

Name:Benjamin L. Brown

 

Title:Director

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

EAST WEST BANK, as a Lender

 

 

 

 

 

By:/s/ Kaylan Hopson

 

Name:Kaylan Hopson

 

Title:First Vice President

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

WELLS FARGO BANK, N.A., as a Lender

 

 

 

 

 

By:/s/ Max Gilbert

 

Name:Max Gilbert

 

Title:Vice President

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

BANK OF AMERICA, N.A., as a Lender

 

 

 

 

 

By:/s/ Greg M. Hall

 

Name:Greg M. Hall

 

Title:Vice President

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

GOLDMAN SACHS BANK USA, as a Lender

 

 

 

 

 

By:/s/ Jamie Minieri

 

Name:Jamie Minieri

 

Title:Authorized Signatory

 


Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

 

BP ENERGY COMPANY, as a Lender

 

 

 

 

 

By:/s/ Mark A. Galicia

 

Name:Mark A. Galicia

 

Title:Attorney-In-Fact

 

Signature Page
Third Amendment to Third Amended and Restated Credit Agreement

 

Exhibit 99.1

Montage Resources Corporation Announces First Quarter 2020 Operational and Financial Results and Updates Full Year 2020 Guidance Including Additional 10% Reduction to Expected Capital Expenditures

IRVING, TX- May 7, 2020- (BUSINESS WIRE) - Montage Resources Corporation (NYSE:MR) (the “Company” or “Montage Resources”) today announced its first 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.

First Quarter 2020 Highlights:

 

•

Average net daily production was 610.7 MMcfe per day, 3% above the midpoint of the Company’s previously issued guidance range and above analyst consensus expectations

 

•

Average natural gas equivalent realized price was $2.56 per Mcfe, including cash settled derivatives and excluding firm transportation expenses

 

•

Per unit cash production costs (including lease operating, transportation, gathering and compression, and production and ad valorem taxes) were $1.28 per Mcfe, outperforming the midpoint of the Company’s previously issued guidance range and better than analyst consensus expectations

 

•

Net income was $2.8 million; Income from continuing operations before income taxes was $10.6 million; Adjusted net income1 was $1.2 million; and Adjusted EBITDAX1 was $62.7 million, above of analyst consensus expectations

Updated Guidance:

 

•

The Company has lowered its full year 2020 capital spending guidance to $130 - $150 million, a reduction of approximately 10% reflecting the further optimization of its development activity and additional savings primarily due to service cost reductions, as well as operational efficiencies that have continued to reduce cycle times

 

•

Due to the downward movement in oil prices movement and demand destruction from the COVID-19 pandemic, in April the Company shut-in low margin production in its liquids-rich producing areas. These shut-ins primarily impacted the Company’s Utica condensate production. In early May, the Company increased its condensate production with the improvement of oil prices and cash-margins, and the Company expects some level of marginal shut-ins to continue until industry conditions and cash-margins dictate resuming production from the remaining affected wells.  Based upon current oil prices, the Company expects the curtailed production to have a negligible, if any, negative impact on its second quarter 2020 cash flows.

 

•

The Company is adjusting its full year 2020 production guidance to 555 – 575 MMcfe per day (which is 3% above the reported 2019 production of approximately 548 MMcfe per day) from 570 – 590 MMcfe per day, approximately 3% lower based upon the midpoint of the Company’s previously issued guidance ranges,  to account for the prudent second quarter production deferments which will retain flush volumes from these shut-in wells for better pricing

 

 

1

Non-GAAP measure. See reconciliation for details

John Reinhart, President and CEO, commented on the Company’s operational and financial results, “In much the same fashion as our actions in the first quarter of 2020 as an early mover in reducing capital expenditures and refocusing on natural gas given the lower commodity price environment and improving gas macro-economic outlook, the Company continues to dynamically optimize the development of our high quality asset base in order to maximize the fundamental value of our company while preserving our balance sheet health and maximizing full-year 2020 cash flow generation.   We currently anticipate the limited production deferments announced today will result in a reduction of our sequential quarter over quarter production and will have a minor impact of approximately 3% on

 

 

our full year 2020 production guidance.  Furthermore, we believe the actions taken will have negligible impacts on second quarter 2020 cash flows and will ensure that we are in a strong position, both financially and structurally, to take advantage of the oil market’s recovery.  As oil demand returns and economic conditions improve, we expect to return the remaining production that is currently shut-in and deliver value in excess of what would be realized in the current price environment.  In addition to the prudent steps to preserve 2020 cash flows from our production base, the company is very pleased to announce a further 10% reduction to our 2020 capital spending plans that are associated with per-unit development cost reductions which we believe demonstrates our execution prowess and reinforces our ability to quickly adjust and deliver economic returns under a wide-range of market conditions.

In the first quarter of 2020, Montage Resources continued to extend its impressive track record with our Company again achieving strong execution that delivered performance ahead of the midpoint of our guidance ranges and better than analyst consensus estimates.  In just over one year, we have made significant progress on our strategic plan that has resulted in an approximate 50% increase in production since the end of 2018 while providing many meaningful operational, commercial, and financial achievements.  We will continue to leverage our experience while executing upon a plan that targets our goals of free cash flow generation and debt reduction.”

Operational Discussion

The Company’s net production for the three months ended March 31, 2020 and 2019 is set forth in the following table:

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Production:

 

 

 

 

 

 

 

 

Natural gas (MMcf)

 

 

44,298.6

 

 

 

27,205.0

 

NGLs (Mbbls)

 

 

1,218.1

 

 

 

980.5

 

Oil (Mbbls)

 

 

661.7

 

 

 

598.0

 

Total (MMcfe)

 

 

55,577.4

 

 

 

36,676.0

 

 

 

 

 

 

 

 

 

 

Average daily production volume:

 

 

 

 

 

 

 

 

Natural gas (Mcf/d)

 

 

486,798

 

 

 

302,278

 

NGLs (Bbls/d)

 

 

13,386

 

 

 

10,894

 

Oil (Bbls/d)

 

 

7,271

 

 

 

6,644

 

Total (MMcfe/d)

 

 

610.7

 

 

 

407.5

 

Financial Discussion

Revenue for the three months ended March 31, 2020 totaled $133.4 million, compared to $141.5 million for the three months ended March 31, 2019.  Adjusted Revenue2, which includes the impact of cash settled derivatives and excludes brokered natural gas and marketing revenue and other revenue, totaled $142.1 million for the three months ended March 31, 2020 compared to $128.6 million for the three months ended March 31, 2019.  Net Income for the three months ended March 31, 2020 was $2.8 million, or $0.08 per share, compared to Net Loss of ($14.1) million, or $(0.55) per share, for the three months ended March 31, 2019. Adjusted Net Income2 for the three months ended March 31, 2020 was $1.2 million, or $0.03 per share, compared to $18.0 million, or $0.70 per share for the three months ended March 31, 2019. Adjusted EBITDAX2 was $62.7 million for the three months ended March 31, 2020 compared to $68.9 million for the three months ended March 31, 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 months ended March 31, 2020 and 2019 are set forth in the table below:

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Average realized price (excluding cash settled

   derivatives and firm transportation)

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

1.79

 

 

$

3.01

 

NGLs ($/Bbl)

 

 

15.23

 

 

 

21.67

 

Oil ($/Bbl)

 

 

39.64

 

 

 

48.09

 

   Total average prices ($/Mcfe)

 

 

2.23

 

 

 

3.59

 

 

 

 

 

 

 

 

 

 

Average realized price (including cash settled

   derivatives, excluding firm transportation)

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

2.16

 

 

$

2.85

 

NGLs ($/Bbl)

 

 

15.56

 

 

 

21.89

 

Oil ($/Bbl)

 

 

41.26

 

 

 

49.66

 

   Total average prices ($/Mcfe)

 

 

2.56

 

 

 

3.52

 

 

 

 

 

 

 

 

 

 

Average realized price (including firm transportation,

   excluding cash settled derivatives)

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

1.36

 

 

$

2.45

 

NGLs ($/Bbl)

 

 

15.23

 

 

 

21.67

 

Oil ($/Bbl)

 

 

39.64

 

 

 

48.09

 

   Total average prices ($/Mcfe)

 

 

1.89

 

 

 

3.18

 

 

 

 

 

 

 

 

 

 

Average realized price (including cash settled derivatives

   and firm transportation)

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

1.74

 

 

$

2.30

 

NGLs ($/Bbl)

 

 

15.56

 

 

 

21.89

 

Oil ($/Bbl)

 

 

41.26

 

 

 

49.66

 

   Total average prices ($/Mcfe)

 

 

2.22

 

 

 

3.10

 

*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 $0.34 per Mcfe of firm transportation expense, were $1.28 per Mcfe for the first quarter of 2020, a decrease of approximately 9% compared to the first quarter of 2019.  

General and administrative expense (including one-time merger-related expenses) was $9.9 million and $28.9 million for the three months ended March 31, 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 $8.6 million and $8.3 million for the three months ended March 31, 2020 and 2019, respectively. General and administrative expense per Mcfe (including one-time merger-related expenses) was $0.18 in the three months ended March 31, 2020 compared to $0.79 in the three months ended March 31, 2019. Cash general and administrative expense3 per Mcfe (excluding merger-related expenses, severance and stock-based compensation expense) declined approximately 35% to $0.15 in the three months ended March 31, 2020 compared to $0.23 in the three months ended March 31, 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

March 31,

 

 

 

2020

 

 

2019

 

Operating expenses (in thousands):

 

 

 

 

 

 

 

 

Lease operating

 

$

12,043

 

 

$

7,525

 

Transportation, gathering and compression

 

 

54,124

 

 

 

41,168

 

Production and ad valorem taxes

 

 

4,868

 

 

 

2,848

 

Total cash production costs

 

$

71,035

 

 

$

51,541

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion, amortization and accretion

 

 

44,135

 

 

 

29,897

 

General and administrative1

 

 

9,880

 

 

 

28,930

 

 

 

 

 

 

 

 

 

 

Operating expenses per Mcfe:

 

 

 

 

 

 

 

 

Lease operating

 

$

0.22

 

 

$

0.21

 

Transportation, gathering and compression

 

 

0.97

 

 

 

1.12

 

Production and ad valorem taxes

 

 

0.09

 

 

 

0.08

 

Total cash production costs

 

$

1.28

 

 

$

1.41

 

 

 

 

 

 

 

 

 

 

Depreciation, depletion, amortization and accretion

 

 

0.79

 

 

 

0.82

 

General and administrative2

 

 

0.18

 

 

 

0.79

 

 

1

Includes stock-based compensation, merger-related expenses and severance of $ 1.3 million and $ 20.6 million for the three months ended March 31, 2020 and 2019, respectively

 

2

Includes stock-based compensation, merger-related expenses and severance of $ 0.03 per Mcfe and $ 0.56 per Mcfe for the three months ended March 31, 2020 and 2019, respectively

Cash Margins

The Company’s cash margins are detailed in the table below:

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

December 31, 2019

 

(per Mcfe)

 

 

 

 

 

 

 

 

 

 

 

 

Average realized price (including cash settled derivatives, excluding

   firm transportation)

 

$

2.56

 

 

$

3.52

 

 

$

3.01

 

Total cash production costs1

 

 

1.28

 

 

 

1.41

 

 

 

1.33

 

Cash production margin

 

$

1.28

 

 

$

2.11

 

 

$

1.68

 

Cash production margin %

 

 

50

%

 

 

60

%

 

 

56

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash production margin

 

$

1.28

 

 

$

2.11

 

 

$

1.68

 

Cash general and administrative expenses2

 

 

0.15

 

 

 

0.23

 

 

 

0.16

 

Cash operating margin

 

$

1.13

 

 

$

1.88

 

 

$

1.52

 

Cash operating margin %

 

 

44

%

 

 

53

%

 

 

50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash operating margin

 

$

1.13

 

 

$

1.88

 

 

$

1.52

 

Interest expense

 

 

0.27

 

 

 

0.38

 

 

 

0.26

 

Corporate cash operating margin3

 

$

0.86

 

 

$

1.50

 

 

$

1.26

 

Corporate cash operating margin %

 

 

34

%

 

 

43

%

 

 

42

%

 

 

 

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

First quarter 2020 capital expenditures were $52.4 million, including $50.3 million for drilling and completions, $1.9 million for land-related expenditures and $0.2 million for other expenditures.

During the first quarter of 2020, the Company commenced drilling 4 gross (3.6 net) operated wells, commenced completions of 4 gross (3.1 net) operated wells and turned to sales 3 gross (2.8 net) operated wells.

Financial Position and Liquidity

As of March 31, 2020, the Company’s liquidity was $328.1 million, consisting of $7.3 million in cash and cash equivalents and $320.8 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 $150.0 million in outstanding borrowings).

Subsequent to the end of the first quarter 2020, the Company completed the semi-annual redetermination of the borrowing base under its revolving credit facility, which resulted in a fully committed borrowing base of $475 million. The next redetermination of the borrowing base under the Company’s revolving credit facility is scheduled for the fall of 2020.

Michael Hodges, Executive Vice President and Chief Financial Officer, commented, “We are very proud of the results in the first quarter of 2020 that have allowed the Company to solidify its financial strength despite a weakening commodity price environment. As the team continues to mitigate the effects of the lower oil price and demand destruction, we expect that the benefits of the flexibility of our portfolio, our continued improvement in operating costs and our ability to optimize our uncommitted volumes that allow the Company to achieve an uplift relative to in-basin Appalachian natural gas pricing will permit us to maintain a significant strategic advantage.

We are extremely pleased with the continued commitment from our bank group and the strong results of our spring borrowing base redetermination, despite the significantly lower bank price decks utilized by the lenders this spring. While our Appalachian peers have experienced an approximately 12% average reduction in their borrowing base this spring, the outcome of Montage’s spring borrowing base redetermination reinforces the strength of our asset base and underlying value of the expected future cash flows.  The Company’s pro forma liquidity (reflecting the $475 million borrowing base) remains in excess of $300 million as we execute on our 2020 development plan that targets free cash flow generation. Finally, we believe our strong hedge book remains a key element of our strategy, with approximately 66% of our natural gas hedged and approximately 61% 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 March 31, 2020:

 

 

Natural Gas Derivatives:

 

Description

 

Volume

(MMBtu/d)

 

 

Production Period

 

Weighted Average

Price ($/MMBtu)

 

Natural Gas Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

50,000

 

 

April 2020 – December 2020

 

$

2.67

 

 

 

 

100,000

 

 

April 2020 – June 2020

 

$

2.69

 

 

 

 

30,000

 

 

July 2020 – December 2020

 

$

2.60

 

 

 

 

25,000

 

 

April 2020 – March 2021

 

$

2.60

 

 

 

 

70,000

 

 

July 2020 – March 2021

 

$

2.52

 

 

 

 

50,000

 

 

October 2020 – March 2021

 

$

2.65

 

 

 

 

50,000

 

 

January 2021 – March 2022

 

$

2.51

 

Natural Gas Collars:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

50,000

 

 

April 2020 – December 2020

 

$

2.49

 

Ceiling sold price (call)

 

 

50,000

 

 

April 2020 – December 2020

 

$

2.88

 

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)

 

 

30,000

 

 

April 2020 – December 2020

 

$

2.70

 

Floor sold price (put)

 

 

30,000

 

 

April 2020 – December 2020

 

$

2.40

 

Ceiling sold price (call)

 

 

30,000

 

 

April 2020 – December 2020

 

$

3.05

 

Floor purchase price (put)

 

 

50,000

 

 

April 2020 – June 2020

 

$

2.82

 

Floor sold price (put)

 

 

50,000

 

 

April 2020 – June 2020

 

$

2.40

 

Ceiling sold price (call)

 

 

50,000

 

 

April 2020 – June 2020

 

$

3.11

 

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

 

Natural Gas Call/Put Options:

 

 

 

 

 

 

 

 

 

 

Floor sold price (put)

 

 

50,000

 

 

April 2020 – December 2020

 

$

2.30

 

Floor sold price (put)

 

 

50,000

 

 

April 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

 

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)

 

 

50,000

 

 

January 2023 – December 2023

 

$

3.00

 

Basis Swaps:

 

 

 

 

 

 

 

 

 

 

Appalachia - Dominion

 

 

12,500

 

 

April 2020 – October 2020

 

$

(0.52

)

Appalachia - Dominion

 

 

20,000

 

 

April 2020 – December 2020

 

$

(0.59

)

 

 

 

Oil Derivatives:

 

Description

 

Volume

(Bbls/d)

 

 

Production Period

 

Weighted Average

Price ($/Bbl)

 

Oil Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

1,500

 

 

April 2020 – December 2020

 

$

57.07

 

 

 

 

1,000

 

 

July 2020 – December 2020

 

$

56.53

 

 

 

 

250

 

 

July 2020 – March 2021

 

$

53.20

 

 

 

 

250

 

 

January 2021 – March 2021

 

$

53.00

 

Oil Collars:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

500

 

 

April 2020 – December 2020

 

$

50.00

 

Ceiling sold price (call)

 

 

500

 

 

April 2020 – December 2020

 

$

64.00

 

Floor purchase price (put)

 

 

500

 

 

July 2020 – December 2020

 

$

52.00

 

Ceiling sold price (call)

 

 

500

 

 

July 2020 – December 2020

 

$

60.00

 

Oil Three-way Collars:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

2,000

 

 

April 2020 – June 2020

 

$

62.50

 

Floor sold price (put)

 

 

2,000

 

 

April 2020 – June 2020

 

$

55.00

 

Ceiling sold price (call)

 

 

2,000

 

 

April 2020 – June 2020

 

$

74.00

 

Oil Call/Put Options:

 

 

 

 

 

 

 

 

 

 

Swaption sold price (call)

 

 

500

 

 

January 2021 – December 2021

 

$

56.80

 

Floor sold price (put)

 

 

500

 

 

July 2020 – December 2020

 

$

45.00

 

 

NGL Derivatives:

 

Description

 

Volume

(Bbls/d)

 

 

Production Period

 

Weighted Average

Price ($/Bbl)

 

Propane Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

750

 

 

April 2020 – December 2020

 

$

21.46

 

 

Subsequent to the End of the First Quarter:

The below table illustrates the Company’s hedging activities subsequent to the end of the first quarter 2020:

Natural Gas Derivatives:

 

Description

 

Volume

(MMBtu/d)

 

 

Production Period

 

Weighted Average

Price ($/MMBtu)

 

Natural Gas Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

July 2020 – September 2020

 

$

2.12

 

 

 

 

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 Call/Put Options:

 

 

 

 

 

 

 

 

 

 

Floor sold price (put)

 

 

15,000

 

 

July 2020 – September 2020

 

$

1.60

 

 

 

Guidance

The Company is providing updated full year 2020 guidance as set forth in the table below (updated guidance in italics).  The Company currently believes that its second quarter 2020 production will average between 480 - 500 MMcfe per day.

 

 

 

FY 2020

Production MMcfe/d

 

555 - 575

% Gas

 

81% - 83%

% NGL

 

10% - 12%

% Oil

 

6% - 8%

Gas Price Differential ($/Mcf)1,2

 

$(0.20) - $(0.30)

Oil Differential ($/Bbl)1,3

 

$(5.00) - $(6.00)

NGL Prices (% of  WTI)1

 

35% - 45%

Cash Production Costs ($/Mcfe)4

 

$1.25 - $1.35

Cash G&A ($mm)5

 

$31 - $35

CAPEX ($mm)

 

$130 - $150

 

1

Excludes impact of hedges

 

2

Excludes the cost of firm transportation

 

3

Includes the impact of declining WTI price on reported oil differential in first quarter of 2020; expected oil differential for remaining nine months of 2020 is approximately $7.50 - $8.50 ($/Bbl)

 

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 first quarter 2020 financial and operational results is scheduled for Friday, May 8, 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 First Quarter 2020 Earnings Call. A replay of the call will be available through July 8, 2020. To access the phone replay, dial 877-660-6853 or 201-612-7415 for international callers. The conference ID is 13702797. 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)

 

 

 

March 31,

2020

 

 

December 31,

2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,308

 

 

$

12,056

 

Accounts receivable

 

 

60,621

 

 

 

77,402

 

Assets held for sale

 

 

843

 

 

 

1,047

 

Other current assets

 

 

60,739

 

 

 

35,509

 

Total current assets

 

 

129,511

 

 

 

126,014

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT

 

 

 

 

 

 

 

 

Oil and natural gas properties, successful efforts method:

 

 

 

 

 

 

 

 

Unproved properties

 

 

496,817

 

 

 

508,576

 

Proved oil and gas properties, net

 

 

1,259,704

 

 

 

1,251,105

 

Other property and equipment, net

 

 

11,007

 

 

 

11,226

 

Total property and equipment, net

 

 

1,767,528

 

 

 

1,770,907

 

 

 

 

 

 

 

 

 

 

OTHER NONCURRENT ASSETS

 

 

 

 

 

 

 

 

Other assets

 

 

6,305

 

 

 

7,616

 

Operating lease right-of-use assets

 

 

34,500

 

 

 

36,975

 

Assets held for sale

 

 

2,907

 

 

 

9,665

 

TOTAL ASSETS

 

$

1,940,751

 

 

$

1,951,177

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

136,491

 

 

$

119,907

 

Accrued capital expenditures

 

 

26,534

 

 

 

43,500

 

Accrued liabilities

 

 

26,455

 

 

 

53,866

 

Accrued interest payable

 

 

11,347

 

 

 

21,308

 

Liabilities associated with assets held for sale

 

 

2,505

 

 

 

2,815

 

Operating lease liability

 

 

12,969

 

 

 

12,666

 

Total current liabilities

 

 

216,301

 

 

 

254,062

 

 

 

 

 

 

 

 

 

 

NONCURRENT LIABILITIES

 

 

 

 

 

 

 

 

Debt, net of unamortized discount and debt issuance costs

 

 

501,234

 

 

 

500,541

 

Revolving credit facility

 

 

150,000

 

 

 

130,000

 

Asset retirement obligations

 

 

30,381

 

 

 

29,877

 

Other liabilities

 

 

13,114

 

 

 

8,029

 

Operating lease liability

 

 

21,873

 

 

 

24,569

 

Liabilities associated with assets held for sale

 

 

7,169

 

 

 

7,013

 

Total liabilities

 

 

940,072

 

 

 

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, 35,804,544

   and 35,770,934 shares issued and outstanding, respectively

 

 

383

 

 

 

383

 

Additional paid in capital

 

 

2,353,169

 

 

 

2,352,309

 

Treasury stock, shares at cost; 2,528,440 and 2,508,485 shares, respectively

 

 

(10,144

)

 

 

(10,049

)

Accumulated deficit

 

 

(1,342,729

)

 

 

(1,345,557

)

Total stockholders’ equity

 

 

1,000,679

 

 

 

997,086

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

1,940,751

 

 

$

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

March 31,

 

 

 

2020

 

 

2019

 

REVENUES

 

 

 

 

 

 

 

 

Natural gas, oil and natural gas liquids sales

 

$

123,871

 

 

$

131,828

 

Brokered natural gas and marketing revenue

 

 

9,488

 

 

 

9,530

 

Other revenue

 

 

66

 

 

 

139

 

Total revenues

 

 

133,425

 

 

 

141,497

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Lease operating

 

 

12,043

 

 

 

7,525

 

Transportation, gathering and compression

 

 

54,124

 

 

 

41,168

 

Production and ad valorem taxes

 

 

4,868

 

 

 

2,848

 

Brokered natural gas and marketing expense

 

 

9,258

 

 

 

9,459

 

Depreciation, depletion, amortization and accretion

 

 

44,135

 

 

 

29,897

 

Exploration

 

 

13,271

 

 

 

16,789

 

General and administrative

 

 

9,880

 

 

 

28,930

 

Loss on sale of assets

 

 

554

 

 

 

2

 

Other expense

 

 

16

 

 

 

24

 

Total operating expenses

 

 

148,149

 

 

 

136,642

 

OPERATING INCOME (LOSS)

 

 

(14,724

)

 

 

4,855

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Gain (loss) on derivative instruments

 

 

40,131

 

 

 

(4,931

)

Interest expense, net

 

 

(14,834

)

 

 

(13,840

)

Other income

 

 

12

 

 

 

—

 

Total other income (expense), net

 

 

25,309

 

 

 

(18,771

)

INCOME (LOSS) FROM CONTINUING OPERATIONS

   BEFORE INCOME TAXES

 

 

10,585

 

 

 

(13,916

)

Income tax benefit (expense)

 

 

—

 

 

 

—

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

 

10,585

 

 

 

(13,916

)

Loss from discontinued operations, net of income tax

 

 

(7,757

)

 

 

(182

)

NET INCOME (LOSS)

 

$

2,828

 

 

$

(14,098

)

 

 

 

 

 

 

 

 

 

EARNINGS (LOSS) PER SHARE OF COMMON STOCK

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

Weighted average common stock outstanding

 

 

35,772

 

 

 

25,564

 

Income (loss) from continuing operations

 

$

0.30

 

 

$

(0.54

)

Loss from discontinued operations

 

 

(0.22

)

 

 

(0.01

)

Net income (loss)

 

$

0.08

 

 

$

(0.55

)

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

Weighted average common stock outstanding

 

 

35,858

 

 

 

25,564

 

Income (loss) from continuing operations

 

$

0.30

 

 

$

(0.54

)

Loss from discontinued operations

 

 

(0.22

)

 

 

(0.01

)

Net income (loss)

 

$

0.08

 

 

$

(0.55

)

 

 

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 months ended March 31, 2020 and 2019.

 

 

Three Months Ended

March 31,

 

$ thousands

 

2020

 

 

2019

 

Total revenues

 

$

133,425

 

 

$

141,497

 

Net cash receipts (payments) on derivative instruments

 

 

18,236

 

 

 

(3,186

)

Brokered natural gas and marketing revenue

 

 

(9,488

)

 

 

(9,530

)

Other revenue

 

 

(66

)

 

 

(139

)

Adjusted revenue

 

$

142,107

 

 

$

128,642

 

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 months ended March 31, 2020 and 2019.

 

 

Three Months Ended

March 31,

 

$ thousands

 

2020

 

 

2019

 

Income (loss) from continuing operations before income taxes, as reported

 

$

10,585

 

 

$

(13,916

)

(Gain) loss on derivative instruments

 

 

(40,131

)

 

 

4,931

 

Net cash receipts (payments) on settled derivatives

 

 

18,236

 

 

 

(3,186

)

Stock-based compensation

 

 

860

 

 

 

6,001

 

Impairment of unproved properties

 

 

10,720

 

 

 

9,600

 

Loss on sale of assets

 

 

554

 

 

 

2

 

Merger-related expenses

 

 

190

 

 

 

14,583

 

Severance

 

 

224

 

 

 

—

 

Income before income taxes, as adjusted

 

 

1,238

 

 

 

18,015

 

Adjusted net income

 

$

1,238

 

 

$

18,015

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

Basic

 

$

0.08

 

 

$

(0.55

)

Diluted

 

$

0.08

 

 

$

(0.55

)

 

 

 

 

 

 

 

 

 

Adjusted net income per common share

 

 

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

0.70

 

Diluted

 

$

0.03

 

 

$

0.70

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

35,772

 

 

 

25,564

 

Diluted

 

 

35,858

 

 

 

25,711

 

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 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

March 31,

 

$ thousands

 

2020

 

 

2019

 

Net income (loss)

 

$

2,828

 

 

$

(14,098

)

Depreciation, depletion, amortization and accretion

 

 

44,135

 

 

 

29,897

 

Exploration expense

 

 

13,271

 

 

 

16,789

 

Stock-based compensation

 

 

860

 

 

 

6,001

 

Loss on sale of assets

 

 

554

 

 

 

2

 

(Gain) loss on derivative instruments

 

 

(40,131

)

 

 

4,931

 

Net cash receipts (payments) on settled derivatives

 

 

18,236

 

 

 

(3,186

)

Interest expense, net

 

 

14,834

 

 

 

13,840

 

Other income

 

 

(12

)

 

 

—

 

Merger-related expenses

 

 

190

 

 

 

14,583

 

Loss from discontinued operations1

 

 

7,757

 

 

 

182

 

Severance

 

 

224

 

 

 

—

 

Adjusted EBITDAX

 

$

62,746

 

 

$

68,941

 

 

 

1

Includes a $6.8 million non-cash impairment of proved properties held for sale

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

March 31,

 

 

Guidance

 

$ thousands

 

2020

 

 

2019

 

 

For the Year Ending

December 31, 2020

 

General and administrative expenses,

   estimated to be reported

 

$

9,880

 

 

$

28,930

 

 

$36,000-$43,000

 

Stock-based compensation expenses

 

 

(860

)

 

 

(6,001

)

 

(5,000 - 7,000)

 

Cash general and administrative expenses

 

$

9,020

 

 

$

22,929

 

 

$31,000-$36,000

 

Merger-related expenses

 

 

(190

)

 

 

(14,583

)

 

(0 - 1,000)

 

Severance

 

 

(224

)

 

 

—

 

 

 

—

 

Cash general and administrative expenses,

   excluding merger-related expenses and severance

 

$

8,606

 

 

$

8,346

 

 

$31,000-$35,000

 

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 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.  

 

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.

 

 

Contact:

Montage Resources Corporation

Douglas Kris, Investor Relations

469-444-1736

dkris@mresources.com