Ascent Resources Utica Holdings Reports Second Quarter 2020 Operating And Financial Results

Second Quarter 2020 Highlights:

- Average net production of 2.1 bcfe per day exceeded guidance (increase of 4% compared to Q1 2020)

- Capital expenditures incurred during the quarter totaled $160 million (decrease of 34% compared to Q1 2020)

- Lowered average development cost to approximately $625 per lateral foot

- Deliberate multi-year hedge program delivered realizations for the quarter totaling $169 million

- Issued second annual Environmental, Social and Governance Report

News provided by

Ascent Resources, LLC

Aug 12, 2020, 13:52 ET

OKLAHOMA CITY, Aug. 12, 2020 /PRNewswire/ -- Ascent Resources Utica Holdings, LLC ("Ascent", the "Company" "we" or "our") today reported its second quarter 2020 operating and financial results and reiterated full year 2020 guidance. In addition, Ascent announced a conference call with analysts and investors scheduled for 9 AM CDT / 10 AM EDT, Thursday, August 13, 2020. For more detailed information on Ascent's assets and business, please refer to the latest investor presentation and additional information located at https://www.ascentresources.com/investors.

"As shown via our results, Ascent continues to deliver best-in-class operational results of any unconventional resource play in North America," said Jeff Fisher, Chairman and Chief Executive Officer. "The second quarter saw our overall capital efficiency reach new records as we produced 2.1 bcfe net per day on only $160 million of quarterly capital expenditures incurred. As a result, we are able to reiterate our production, capital and free cash flow guidance despite the many headwinds the country and the industry have faced. This was all accomplished while still continuing to prioritize the health of our employees, contractors and communities where we operate."

Second Quarter 2020 Results

For the second quarter of 2020, Ascent reported a net loss of $291 million and adjusted net loss of $23 million, compared to net income of $356 million and adjusted net income of $64 million in the second quarter of 2019. The Company's adjusted EBITDAX and capital expenditures incurred for the second quarter of 2020 were $211 million and $160 million, respectively.

Average net daily production for the second quarter of 2020 was 2,087 mmcfe per day, a 19% increase compared to the second quarter of 2019 and 4% above first quarter of 2020. Second quarter 2020 production consisted of 1,869 mmcf per day of natural gas, 11,319 bbls per day of oil and 24,978 bbls per day of natural gas liquids ("NGL").

Balance Sheet and Hedge Position Update

As of June 30, 2020, Ascent's principal amount of debt outstanding was approximately $2.8 billion, including $1.2 billion drawn under its revolving credit facility, compared to $2.7 billion as of March 31, 2020. As of June 30, 2020, Ascent had $155 million of letters of credit issued and $497 million of available capacity under its fully committed $1.85 billion borrowing base. Combined with $9 million of cash on hand, the Company had liquidity of $506 million. As of June 30, 2020, Ascent's year-over-year leverage profile improved as highlighted by the net debt / LTM adjusted EBITDAX ratio of 2.5x, as compared to 2.6x as of June 30, 2019.

Ascent has a robust hedge portfolio in place for 2020 and beyond to prudently reduce its exposure to volatility in commodity prices and to protect our expected operating cash flow. As of June 30, 2020, the Company had hedged over 1.5 bcf per day of natural gas production for the remainder of the calendar year 2020 at approximately $2.64 per mmbtu ($2.82 per mcf). In addition, the Company has hedged 4,600 bbls per day of crude oil production at an average price above $39.00 per bbl for the remainder of calendar year 2020.

Corporate Responsibility

During the second quarter of 2020, Ascent completed and issued its 2019 Environmental, Social & Governance Report highlighting Ascent's commitment to sustainable business practices and social responsibility. Specifically, Ascent highlighted and provided performance results related to greenhouse gas emissions, health and safety and social engagement. The report can be found at: www.ascentresources.com/responsibility.

On June 15, 2020, the Company re-opened its Ohio and Oklahoma offices in accordance with the strictest social distancing and sanitation requirements recommended by federal, state and local government agencies in response to the COVID-19 pandemic. The Company continues to closely monitor and analyze COVID-19 data issued by the State Department of Health in both Oklahoma and Ohio as well as guidance and recommendations issued by the Centers for Disease Control and Prevention.

About Ascent Resources:

Ascent is the eighth largest producer of natural gas in the United States in terms of daily production and is focused on acquiring, exploring for, developing, producing, and operating natural gas and oil properties located in the Utica Shale in Southeast Ohio. With a continued focus on good corporate citizenship, Ascent is committed to delivering low-cost clean-burning energy to our country and the world, while reducing environmental impacts. For more information, visit www.ascentresources.com.

Contact:
James Short – Director of Strategic Planning & Investor Relations
[email protected]

This news release contains forward-looking statements within the meaning of US federal securities laws. Forward-looking statements express views of Ascent regarding future plans and expectations. Forward-looking statements in this news release include, but are not limited to, statements regarding future operations, business strategy, liquidity and cash flows of Ascent. These statements are based on numerous assumptions and are subject to known and unknown risks and uncertainties, including, commodity price volatility, inherent uncertainty in estimating natural gas, oil and NGL reserves, environmental and regulatory risks, availability of capital, and the other risks described in Ascent's most recent investor presentation provided at www.ascentresources.com/investors. Actual future results may vary materially from those expressed or implied in this news release and Ascent's business, financial condition, results of operations and cash flow could be materially and adversely affected by such risks and uncertainties. As a result, forward-looking statements should be understood to be only predictions and statements of Ascent's current beliefs; they are not guarantees of performance.

ASCENT RESOURCES UTICA HOLDINGS, LLC CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in thousands)	2020		2019		2020		2019

Revenues:
Natural gas	$	275,088	$	360,136	$	567,606	$	820,514
Oil	21,005		65,212		70,559		102,755
NGL	17,344		26,150		53,347		61,592
Commodity derivative (loss) gain	(70,529)		339,681		137,954		182,492
Total Revenues	242,908		791,179		829,466		1,167,353
Operating Expenses:
Lease operating expenses	17,709		16,232		38,636		34,151
Gathering, processing and transportation expenses	229,936		200,176		462,649		400,271
Production and ad valorem taxes	9,201		7,975		18,999		16,447
Exploration expenses	22,858		18,484		49,811		57,738
General and administrative expenses	20,629		14,497		35,049		30,841
Natural gas and oil depreciation, depletion and amortization	201,331		156,376		376,881		315,508
Depreciation and amortization of other assets	942		782		1,866		1,547
Total Operating Expenses	502,606		414,522		983,891		856,503
(Loss) Income from Operations	(259,698)		376,657		(154,425)		310,850
Other (Expense) Income:
Interest expense, net	(31,233)		(24,868)		(65,153)		(46,011)
Change in fair value of embedded derivative	—		2,007		—		3,145
(Losses) gains on purchases or exchanges of debt	(190)		—		13,303		—
Other income	71		2,074		587		2,577
Total Other Expense	(31,352)		(20,787)		(51,263)		(40,289)
Net (Loss) Income	$	(291,050)	$	355,870	$	(205,688)	$	270,561

ASCENT RESOURCES UTICA HOLDINGS, LLC CONDENSED CONSOLIDATED BALANCE SHEETS DATA (Unaudited)

	June 30,		December 31,
($ in thousands)	2020		2019

Total Current Assets	$	337,835	$	545,116

Property and equipment, net	6,350,004		6,374,276
Other long-term assets	28,159		91,026
Total Assets	$	6,715,998	$	7,010,418

Total Current Liabilities	$	502,213	$	485,292
Long-Term Liabilities:
Long-term debt, net of current portion	2,700,369		2,838,676
Other long-term liabilities	37,660		5,067
Total Long-Term Liabilities	2,738,029		2,843,743

Member's Equity	3,475,756		3,681,383
Total Liabilities and Member's Equity	$	6,715,998	$	7,010,418

ASCENT RESOURCES UTICA HOLDINGS, LLC CONDENSED CONSOLIDATED CASH FLOW DATA (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in thousands)	2020		2019		2020		2019

Cash and Cash Equivalents, Beginning of Period	$	12,978	$	10,445	$	7,346	$	11,030
Net Cash Provided by Operating Activities	179,441		248,489		471,564		590,228
Cash Flows from Investing Activities:
Drilling and completion costs	(188,023)		(329,194)		(345,880)		(597,712)
Acquisitions of natural gas and oil properties	(35,596)		(95,242)		(80,987)		(145,292)
Proceeds from divestitures of natural gas and oil properties	—		3,323		—		3,323
Additions to other property and equipment	(165)		(1,300)		(1,377)		(1,994)
Net Cash Used in Investing Activities	(223,784)		(422,413)		(428,244)		(741,675)
Net Cash Provided by (Used in) Financing Activities	40,326		169,929		(41,705)		146,867
Net (Decrease) Increase in Cash and Cash Equivalents	(4,017)		(3,995)		1,615		(4,580)
Cash and Cash Equivalents, End of Period	$	8,961	$	6,450	$	8,961	$	6,450

ASCENT RESOURCES UTICA HOLDINGS, LLC NATURAL GAS, OIL AND NGL PRODUCTION AND PRICES (Unaudited)

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2020				2019			2020			2019

Production
Natural gas (mmcf)	170,086				142,115			325,900			286,759
Oil (mbbls)	1,030				1,230			2,283			1,997
NGL (mbbls)	2,273				1,676			5,523			3,317
Natural Gas Equivalents (mmcfe)	189,903				159,552			372,735			318,654

Daily Production
Natural gas (mmcf/d)	1,869				1,562			1,791			1,584
Oil (mbbls/d)	11				14			13			11
NGL (mbbls/d)	25				18			30			18
Natural Gas Equivalents (mmcfe/d)	2,087				1,753			2,048			1,761
% Natural Gas	90		%		89		%	87		%	90		%
% Liquids	10		%		11		%	13		%	10		%

Average Realized Prices
Natural gas ($/mcf)	$	1.62			$	2.53		$	1.74		$	2.86
Oil ($/bbl)	$	20.39		—	$	53.01		$	30.91		$	51.45
NGL ($/bbl)	$	7.63			$	15.60		$	9.66		$	18.57

Natural Gas Equivalents ($/mcfe)	$	1.65			$	2.83		$	1.86		$	3.09
Settlements of commodity derivatives ($/mcfe)	0.89				0.21			0.85			0.01
Average sales price, after effects of settled derivatives ($/mcfe)	$	2.54			$	3.04		$	2.71		$	3.10

ASCENT RESOURCES UTICA HOLDINGS, LLC CAPITAL EXPENDITURES INCURRED (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in thousands)	2020		2019		2020		2019

Capital Expenditures Incurred:
Drilling and completion costs incurred	$	126,000	$	334,538	$	321,114	$	592,696
Acquisition and leasehold costs incurred	12,371		48,306		36,607		79,484
Capitalized interest incurred	21,952		32,805		44,636		70,160
Total Capital Expenditures Incurred	$	160,323	$	415,649	$	402,357	$	742,340

ASCENT RESOURCES UTICA HOLDINGS, LLC RECONCILIATIONS OF ADJUSTED NET INCOME (LOSS) (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in thousands)	2020		2019		2020		2019

Net (Loss) Income	$	(291,050)	$	355,870	$	(205,688)	$	270,561
Adjustments to reconcile net (loss) income to adjusted net (loss) income:
Impairment of unproved natural gas and oil properties	22,369		16,450		48,679		55,139
Change in fair value of commodity derivatives	239,847		(306,033)		177,472		(178,962)
Change in fair value of interest rate derivatives	502		—		502		—
Losses (gains) on purchases or exchanges of debt	190		—		(13,303)		—
Non-recurring legal expense	5,572		—		5,572		—
Change in fair value of embedded derivative	—		(2,007)		—		(3,145)
Other	—		76		—		252
Adjusted Net (Loss) Income (Non-GAAP)^(a)(b)	$	(22,570)	$	64,356	$	13,234	$	143,845


^(a)	As shown above, and on pages 9 and 10, Ascent uses adjusted net income (loss), EBITDAX, adjusted EBITDAX, discretionary cash flow and free cash flow (non-GAAP measures) as supplemental measures to evaluate the performance of its assets. Ascent believes these non-GAAP measures provide meaningful information to our investors, as discussed below. These non-GAAP measures, as used and defined by Ascent, are not measures of performance as determined by United States generally accepted accounting principles (US GAAP) and may not be comparable to similarly titled measures employed by other companies.

	Non-GAAP measures should not be considered in isolation or as substitutes for operating income, net income or loss, cash flows provided by operating, investing and financing activities or other income or cash flow statement data prepared in accordance with US GAAP. Non-GAAP measures provide no information regarding a company's capital structure, borrowings, interest costs, capital expenditures and working capital movement. Non-GAAP measures do not represent funds available for discretionary use because those funds may be required for debt service, capital expenditures, working capital, exploration expenses and other commitments and obligations. However, Ascent's management team believes these non-GAAP measures are useful to an investor in evaluating Ascent's financial performance because these measures:

	Are widely used by investors in the natural gas and oil industry to measure a company's operating performance without regard to items excluded from the calculation of such term, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure, and the method by which assets were acquired, among other factors; Are more comparable to estimates used by analysts; Help investors to more meaningfully evaluate and compare the results of Ascent's operations from period to period by removing the effect of its capital structure from its operating structure; Excludes one-time items, non-cash items or items whose timing cannot be reasonably estimated; and Are used by Ascent's management team for various purposes, including as a measure of operating performance, in presentations to its Board of Managers and as a basis for strategic planning and forecasting.




	There are significant limitations to using non-GAAP measures as measures of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect Ascent's net income or loss, the lack of comparability of results of operations of different companies, and the different methods of calculating non-GAAP measures reported by different companies.

^(b)	Ascent defines "adjusted net (loss) income" as net income (loss) before impairment of unproved natural gas and oil properties; changes in fair value of commodity derivatives; change in fair value of interest rate derivatives; (gains) losses on purchases or exchanges of debt; non-recurring legal expense (benefit); change in fair value of embedded derivative; acquisition expenses; impairment of other property and equipment; and other non-recurring items.

ASCENT RESOURCES UTICA HOLDINGS, LLC RECONCILIATIONS OF EBITDAX, ADJUSTED EBITDAX AND NET DEBT (Unaudited)

EBITDAX and Adjusted EBITDAX
	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in thousands)	2020		2019		2020		2019

Net (Loss) Income	$	(291,050)	$	355,870	$	(205,688)	$	270,561
Adjustments to reconcile net (loss) income to EBITDAX:
Exploration expenses	22,858		18,484		49,811		57,738
Natural gas and oil depreciation, depletion and amortization	201,331		156,376		376,881		315,508
Depreciation and amortization of other assets	942		782		1,866		1,547
Interest expense, net	31,233		24,868		65,153		46,011
EBITDAX (Non-GAAP)^(a)(b)	(34,686)		556,380		288,023		691,365
Adjustments to reconcile EBITDAX to Adjusted EBITDAX:
Change in fair value of commodity derivatives	239,847		(306,033)		177,472		(178,962)
Losses (gains) on purchases or exchanges of debt	190		—		(13,303)		—
Non-recurring legal expense	5,572		—		5,572		—
Change in fair value of embedded derivative	—		(2,007)		—		(3,145)
Other	—		76		—		252
Adjusted EBITDAX (Non-GAAP)^(b)(c)	$	210,923	$	248,416	$	457,764	$	509,510


^(a)	Ascent defines "EBITDAX" as net income (loss) before exploration expenses; depreciation, depletion and amortization; and interest expense, net.

^(b)	See footnote (a) on page 8 for a discussion around our uses of non-GAAP measures.

^(c)	Ascent defines "adjusted EBITDAX" as EBITDAX before changes in fair value of commodity derivatives; (gains) losses on purchases or exchanges of debt; non-recurring legal expense (benefit); acquisition expenses; change in fair value of embedded derivative; and other non-recurring items.


Net Debt and Net Debt to Last Twelve Months ("LTM") Adjusted EBITDAX

	June 30,
($ in thousands)	2020			2019

Net Debt:
Total debt^(a)	$	2,793,728		$	2,737,411
Less: cash and cash equivalents	8,961			6,450
Net Debt^(b)	$	2,784,767		$	2,730,961

Net Debt to LTM Adjusted EBITDAX:
Net Debt^(b)	$	2,784,767		$	2,730,961
LTM Adjusted EBITDAX^(c)	$	1,099,355		$	1,068,027
Net Debt to LTM Adjusted EBITDAX	2.5		x	2.6		x


^(a)	Total debt includes the current portion of our long-term debt.
^(b)	Ascent defines "Net Debt" as total debt less cash and cash equivalents. Management uses net debt to determine our outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand.
^(c)	Adjusted EBITDAX for the LTM ended June 30, 2020.

ASCENT RESOURCES UTICA HOLDINGS, LLC RECONCILIATIONS OF DISCRETIONARY CASH FLOW AND FREE CASH FLOW (Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
($ in thousands)	2020		2019		2020		2019

Net Cash Provided by Operating Activities	$	179,441	$	248,489	$	471,564	$	590,228
Adjustments to reconcile Net Cash Provided by Operating Activities to Discretionary Cash Flow:
Changes in operating assets and liabilities	4,441		(12,078)		(73,450)		(114,613)
Discretionary Cash Flow (Non-GAAP)^(a)(b)	183,882		236,411		398,114		475,615
Adjustments to reconcile Discretionary Cash Flow to Free Cash Flow:
Drilling and completion costs	(188,023)		(329,194)		(345,880)		(597,712)
Acquisitions of natural gas and oil properties	(35,596)		(95,242)		(80,987)		(145,292)
Free Cash Flow (Non-GAAP)^(b)(c)	$	(39,737)	$	(188,025)	$	(28,753)	$	(267,389)


^(a)	Discretionary cash flow is widely accepted as a financial indicator of a natural gas and oil company's ability to generate cash which is used to internally fund exploration and development activities and service debt. Ascent defines "discretionary cash flow" as net cash provided by operating activities before changes in operating assets and liabilities.

^(b)	See footnote (a) on page 8 for a discussion around our uses of non-GAAP measures.

^(c)	Free cash flow is an indicator of a company's ability to generate funding to maintain or expand its asset base, make distributions and repurchase or extinguish debt. Ascent defines "free cash flow" as discretionary cash flow less cash drilling and completion costs and acquisitions of natural gas and oil properties.