Montage Resources Corporation Announces Exceptional First Quarter 2019 Results Driven by Superior Operational Execution, Updates Full Year 2019 Guidance for Increased Production and Enhanced Cash Margins, and Obtains Borrowing Base Increase of 7%

IRVING, Texas–(BUSINESS WIRE)–Montage Resources Corporation (NYSE:MR) (the “Company” or “Montage Resources”) today announced its first quarter 2019 financial and operational results along with second quarter 2019 and revised full year 2019 guidance. Financial and operational results for the first quarter 2019 include the impact of the merger with Blue Ridge Mountain Resources, Inc. (“Blue Ridge”) since the closing of the transaction on February 28, 2019. In addition, the Company will be posting an updated investor presentation to its corporate website.

First Quarter 2019 Highlights:

• Average net daily production was 407.5 MMcfe per day, above the high end of the Company’s previously issued guidance range and above analyst consensus expectations.
• Realized an average natural gas price, before the impact of cash settled derivatives and firm transportation expenses, of $3.01 per Mcf, a $0.14 per Mcf discount to the average monthly NYMEX settled natural gas price during the quarter, with the price differential better than the Company’s previously issued guidance and analyst consensus expectations.
• Per unit cash production costs (including lease operating, transportation, gathering and compression, production and ad valorem taxes) were $1.41 per Mcfe¹, including $0.41 per Mcfe in firm transportation expenses, with the per unit cash production costs better than the Company’s previously issued guidance and analyst consensus expectations.
• Net loss for the first quarter of 2019 was ($14.1) million; Adjusted net income² for the first quarter of 2019 was $18.0 million; and Adjusted EBITDAX² for the first quarter of 2019 was $68.9 million, better than analyst consensus expectations.
• Subsequent to the end of the first quarter 2019, completed its spring borrowing base redetermination, resulting in a $25 million borrowing base increase, or approximately 7%, from $375 million to $400 million.

Positive Revisions to Full Year 2019 Guidance:

• Full year 2019 production guidance of 520 to 540 MMcfe per day, an increase of approximately 3% based upon the midpoint of the Company’s previously issued guidance range.
• Realized natural gas price differential guidance of ($0.15) to ($0.25) per Mcf, better by $0.05 per Mcf based upon the midpoint of the Company’s previously issued guidance range.
• Per unit cash production costs of $1.35 to $1.45 per Mcfe¹, lower by approximately 12.5% based upon the midpoint of the Company’s previously issued guidance range.

John Reinhart, President and CEO, commented on the Company’s first quarter 2019 results, “Our first quarter financials, which include only one full month of consolidated results, highlight the power of the combined entity and the harnessing of operational synergies to drive improved cycle times, translating into higher reported volumes. This production beat, coupled with better per unit cash production costs, delivers cash operating margins that we believe are among the best in the Appalachian Basin. The Company’s focus on cost and operational improvements delivered on first quarter cycle time improvements of approximately two weeks, on average, relative to a very aggressive schedule. The Company is on track to drive well costs down below the published 2019 total well average of approximately $870 per foot. We believe that this level of execution outperformance regarding cost and cycle times will help to potentially accelerate our goals related to cash flow generation while maintaining the balance sheet strength that the Company possesses.

“For the first quarter of 2019, the Company generated revenue of $141.5 million, a 28% increase over the first quarter of 2018, while also realizing a 10% increase in adjusted EBITDAX¹ over the first quarter of 2018. From an operations perspective, the team has been able to steadily achieve a completion cadence of approximately 9 stages per day on the last three pads, allowing us to place wells to sales more quickly than originally budgeted. With the spud to turn-to-sales timeline compressed and the continued outperformance of our wells, we have raised our production guidance for the full year 2019. As we look out at our capital program for the full year, we remain highly confident in our ability to deliver on our production targets while remaining at or below our guidance range for capital expenditures.

“I believe this is a very exciting time for Montage Resources and our shareholders, as the building blocks of our “Focus Five” strategy takes hold. The natural gas macro environment we are currently experiencing reinforces the importance of our belief in being a low cost producer with high quality assets. With a sound business model, clean balance sheet, operational excellence, low leverage, disciplined growth and superior well performance, the opportunity for significant valuation uplift from the current levels remains extremely high.”

Operational Discussion

The Company’s production for the three months ended March 31, 2019 and 2018 is set forth in the following table:

Financial Discussion

Revenue for the three months ended March 31, 2019 totaled $141.5 million, compared to $110.2 million for the three months ended March 31, 2018. Adjusted Revenue², which includes the impact of cash settled derivatives and excludes brokered natural gas and marketing revenue, totaled $128.6 million for the three months ended March 31, 2019 compared to $110.3 million for the three months ended March 31, 2018. Net Income (Loss) for the three months ended March 31, 2019 was ($14.1) million, or $(0.55) per share, compared to ($2.6) million, or $(0.13) per share³, for the three months ended March 31, 2018. Adjusted Net Income² for the three months ended March 31, 2019 was $18.0 million, or $0.70 per share, compared to $10.2 million, or $0.52 per share³, for the three months ended March 31, 2018. Adjusted EBITDAX² was $68.9 million for the three months ended March 31, 2019 compared to $63.0 million for the three months ended March 31, 2018.

Average realized price calculations for the three months ended March 31, 2019 and 2018 are set forth in the table below. Realized price calculations for NGLs include costs related to Mariner East II that are recorded as a reduction to revenue:

Per unit cash production costs, which include $0.41 per Mcfe of firm transportation expense, were $1.41 per Mcfe for the first quarter of 2019, an increase of approximately 1% compared to the first quarter of 2018. The Company’s cash production costs (which include lease operating, transportation, gathering and compression, production and ad valorem taxes) are shown in the table below.

General and administrative expense (including one-time merger-related expenses) was $28.9 million and $9.8 million for the three months ended March 31, 2019 and 2018, respectively, and is shown in the table below. Cash general and administrative expense⁴, excluding merger-related expenses and stock-based compensation expense, were $8.3 million and $7.8 million for the three months ended March 31, 2019 and 2018 respectively. General and administrative expense per Mcfe (including one-time merger-related expenses) was $0.79 in the three months ended March 31, 2019 compared to $0.34 in the three months ended March 31, 2018. Cash general and administrative expense⁴ per Mcfe, excluding merger-related expenses and stock-based compensation, was $0.23 in the three months ended March 31, 2019 compared to $0.27 in the three months ended March 31, 2018.

Capital Expenditures

First quarter 2019 capital expenditures were $103.9 million, including $99.0 million for drilling and completions, $4.6 million for land-related expenditures, and $0.3 million for corporate-related expenditures.

During the first quarter of 2019, the Company commenced drilling 10 gross (8.0 net) operated wells, commenced completions of 9 gross (6.3 net) operated wells and turned to sales 3 gross (2.1 net) operated wells.

Financial Position and Liquidity

As of March 31, 2019, the Company’s liquidity was $271.6 million, consisting of $7.6 million in cash and cash equivalents and $264.0 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 $13.5 million and $97.5 million in outstanding borrowings).

Subsequent to March 31, 2019, the Company borrowed an incremental $25 million under the revolving credit facility and issued an additional $15.7 million in outstanding letters of credit. On May 6, 2019, the Company completed the spring redetermination of its revolving credit facility which resulted in an increase in the borrowing base from $375 million to $400 million. Pro forma for the increase to the borrowing base, the available borrowing capacity under the facility is $248.3 million.

Michael Hodges, Executive Vice President and Chief Financial Officer, commented, “The Company is pleased to announce the 7% increase in our borrowing base that will provide incremental liquidity to Montage Resources as we execute our business plan and reflects the strong production and reserve growth of the Company. The recent increase in our borrowing base, along with the upgrade in the credit rating of our high yield notes, helps to demonstrate the long-term strength of our balance sheet. Our midstream and downstream initiatives continue to deliver exceptional value for the Company, as further evidenced by our Mariner East II sales volumes that began this quarter. We believe we remain well balanced in our firm transportation portfolio which we anticipate will allow us the benefit of optimizing our equity gas at prices that are at a premium to in-basin pricing. 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 March 31, 2019:

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 2019:

Guidance

The Company is announcing second quarter and updated full year 2019 guidance (changes in italics) as set forth in the table below:

Conference Call

A conference call to review the Company’s first quarter financial and operational results is scheduled for Wednesday, May 8, 2019 at 10:00 a.m. Eastern Time. To participate in the call, please dial 877-709-8150 or 201-689-8354 for international callers and reference Montage Resources First Quarter 2019 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 13690365. 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.

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.

Contacts

Montage Resources Corporation
Douglas Kris, Investor Relations
814-325-2059
[email protected]

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