Ascent Resources Utica Holdings Reports Fourth Quarter And Full Year 2019 Operating Results And Announces 2020 Guidance

Three Months Ended

Years Ended

December 31,

December 31,

($ in thousands)

2019

2018

2019

2018

Capital Expenditures:

Drilling and completion costs

$

149,821

$

263,737

$

1,030,294

$

923,141

Acquisition and leasehold costs^(a)

30,483

75,301

141,631

1,725,144

Capitalized interest

24,474

34,637

123,370

126,406

Total Capital Expenditures

$

204,778

$

373,675

$

1,295,295

$

2,774,691

^(a)

Acquisition and leasehold costs for the full year 2018 included $1.5 billion related to significant acquisitions in the third quarter 2018.

Year Ended

December 31,

(in mmcfe)

2019

Proved Reserves at December 31, 2018

7,615,763

Extensions, discoveries and other additions

2,982,736

Revisions

(630,831)

Purchases of reserves

12,407

Sales of reserves

(9,247)

Production

(719,113)

Proved Reserves at December 31, 2019

9,251,715

Proved developed reserves

3,910,032

Proved developed reserves percentage

42

%

Standardized Measure of Discounted Future Net Cash Flows ($ in thousands)(GAAP)

$

3,957,652

Add: Present value of future income taxes discounted at 10% per annum^(a)

—

PV-10 ($ in thousands) (Non-GAAP)^(a)

$

3,957,652

^(a)

Reserve volumes and PV-10 were estimated using SEC reserve recognition standards and pricing assumptions based on the unweighted arithmetic average of the prices on the first day of each month within the 12-month period ended December 31, 2019.  The prices used in Ascent's reserve reports were $2.58 per mmbtu of natural gas and $55.85 per bbl of oil and condensate, before basis differential adjustments. PV-10 is a non-GAAP measure that typically differs from the standardized measure, because the former does not include the effects of estimated future income tax expense.  However, because Ascent is a disregarded entity for income tax purposes, it has estimated no future income tax expense and the two measures are the same as of December 31, 2019, as calculated in the reconciliation above.  PV-10 can be used within the industry and by creditors and securities analysts to evaluate estimated net cash flows from proved reserves on a more comparable basis.

ASCENT RESOURCES UTICA HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Years Ended

December 31,

December 31,

($ in thousands)

2019

2018

2019

2018

Revenues:

Natural gas

$

415,718

$

559,511

$

1,589,099

$

1,444,368

Oil

66,593

37,789

241,521

133,786

NGL

57,668

41,144

148,639

109,221

Commodity derivative gain (loss)

83,616

20,489

441,139

(90,881)

Total Revenues

623,595

658,933

2,420,398

1,596,494

Operating Expenses:

Lease operating expenses

20,327

15,736

72,606

50,163

Gathering, processing and transportation expenses

236,158

201,512

856,126

658,117

Production and ad valorem taxes

8,198

7,697

34,167

23,362

Exploration expenses

41,561

40,513

124,477

156,450

General and administrative expenses

15,322

26,712

61,027

63,794

Acquisition expenses

—

277

—

9,407

Natural gas and oil depreciation, depletion and amortization

203,091

158,327

702,414

500,773

Depreciation and amortization of other assets

875

1,030

3,239

3,912

Total Operating Expenses

525,532

451,804

1,854,056

1,465,978

Income from Operations

98,063

207,129

566,342

130,516

Other (Expense) Income:

Interest expense, net

(34,249)

(25,732)

(109,114)

(92,227)

Change in fair value of embedded derivative

622

4,704

5,026

18,865

Losses on purchases or exchanges of debt

—

(62,233)

—

(62,233)

Other income

819

371

3,711

683

Total Other Expense

(32,808)

(82,890)

(100,377)

(134,912)

Net Income (Loss)

$

65,255

$

124,239

$

465,965

$

(4,396)

ASCENT RESOURCES UTICA HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS DATA

(Unaudited)

December 31,

($ in thousands)

2019

2018

Total Current Assets

$

545,116

$

521,914

Property and equipment, net

6,374,276

5,908,629

Other long-term assets

91,026

56,279

Total Assets

$

7,010,418

$

6,486,822

Total Current Liabilities

$

485,292

$

656,108

Long-Term Liabilities:

Long-term debt, net

2,838,676

2,582,820

Other long-term liabilities

5,067

32,797

Total Long-Term Liabilities

2,843,743

2,615,617

Member's Equity

3,681,383

3,215,097

Total Liabilities and Member's Equity

$

7,010,418

$

6,486,822

ASCENT RESOURCES UTICA HOLDINGS, LLC

CONSOLIDATED CASH FLOW DATA

(Unaudited)

Three Months Ended

Years Ended

December 31,

December 31,

($ in thousands)

2019

2018

2019

2018

Cash and Cash Equivalents, Beginning of Period

$

6,798

$

10,868

$

11,030

$

119,215

Net Cash Provided by Operating Activities

220,908

181,442

1,140,118

688,733

Cash Flows from Investing Activities:

Drilling and completion costs

(235,338)

(270,630)

(1,125,216)

(906,064)

Acquisitions of natural gas and oil properties

(55,860)

(114,673)

(258,001)

(1,409,494)

Proceeds from divestitures of natural gas and oil properties

(2,067)

—

12,474

6,564

Additions to other property and equipment

(583)

(263)

(3,547)

(1,512)

Net Cash Used in Investing Activities

(293,848)

(385,566)

(1,374,290)

(2,310,506)

Net Cash Provided by Financing Activities

73,488

204,286

230,488

1,513,588

Net Increase / (Decrease) in Cash and Cash Equivalents

548

162

(3,684)

(108,185)

Cash and Cash Equivalents, End of Period

$

7,346

$

11,030

$

7,346

$

11,030

ASCENT RESOURCES UTICA HOLDINGS, LLC

NATURAL GAS, OIL AND NGL PRODUCTION AND PRICES

(Unaudited)

Three Months Ended

Years Ended

December 31,

December 31,

2019

2018

2019

2018

Production

Natural gas (mmcf)

182,913

148,815

638,243

457,747

Oil (mbbls)

1,348

713

4,794

2,262

NGL (mbbls)

3,002

1,684

8,685

3,974

Natural Gas Equivalents (mmcfe)

209,016

163,190

719,113

495,168

Daily Production

Natural gas (mmcf/d)

1,988

1,618

1,749

1,254

Oil (bbls/d)

15

8

13

6

NGL (bbls/d)

33

18

24

11

Natural Gas Equivalents (mmcfe/d)

2,272

1,774

1,970

1,357

% Natural Gas

88

%

91

%

89

%

92

%

% Liquids

12

%

9

%

11

%

8

%

Average Realized Prices

Natural gas ($/mcf)

$

2.27

$

3.76

$

2.49

$

3.16

Oil ($/bbl)

$

49.40

$

53.03

$

50.38

$

59.15

NGL ($/bbl)

$

19.21

$

24.44

$

17.11

$

27.48

Natural Gas Equivalents ($/mcfe)

$

2.58

$

3.91

$

2.75

$

3.41

Settlements of commodity derivatives ($/mcfe)

0.39

(0.48)

0.27

(0.11)

Average sales price, after effects of settled derivatives ($/mcfe)

$

2.97

$

3.43

$

3.02

$

3.30

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF ADJUSTED NET INCOME

(Unaudited)

Three Months Ended

Years Ended

December 31,

December 31,

($ in thousands)

2019

2018

2019

2018

Net Income (Loss)

$

65,255

$

124,239

$

465,965

$

(4,396)

Adjustments to reconcile net income (loss) to adjusted net income:

Impairment of unproved natural gas and oil properties

36,450

39,231

115,802

153,047

Change in fair value of commodity derivatives

(3,077)

(98,754)

(249,457)

34,138

Change in fair value of embedded derivative

(622)

(4,704)

(5,026)

(18,865)

Losses on purchases or exchanges of debt

—

62,233

—

62,233

Non-recurring legal expense

—

9,428

—

9,428

Acquisition expenses and other

61

358

375

8,063

Adjusted Net Income (Non-GAAP)^(a)(b)

$

98,067

$

132,031

$

327,659

$

243,648

^(a)

As shown above, and on pages 10 and 11, Ascent uses adjusted net income, 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, taxes, 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 income" as net income (loss) before impairment of unproved natural gas and oil properties; losses on purchases or exchanges of debt; changes in fair value of commodity derivatives; changes in fair value of embedded derivative; non-recurring legal expense (benefit); acquisition expenses and other; and impairment of other property and equipment.

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF EBITDAX AND ADJUSTED EBITDAX

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2019

2018

2019

2018

Net Income (Loss)

$

65,255

$

124,239

$

465,965

$

(4,396)

Adjustments to reconcile net income (loss) to EBITDAX:

Exploration expenses

41,561

40,513

124,477

156,450

Natural gas and oil depreciation, depletion and amortization

203,091

158,327

702,414

500,773

Depreciation and amortization of other assets

875

1,030

3,239

3,912

Interest expense, net

34,249

25,732

109,114

92,227

EBITDAX (Non-GAAP)^(a)(b)

345,031

349,841

1,405,209

748,966

Adjustments to reconcile EBITDAX to Adjusted EBITDAX:

Change in fair value of embedded derivative

(622)

(4,704)

(5,026)

(18,865)

Change in fair value of commodity derivatives

(3,077)

(98,754)

(249,457)

34,138

Losses on purchases or exchanges of debt

—

62,233

—

62,233

Non-recurring legal expense

—

9,428

—

9,428

Acquisition expenses and other

61

358

375

8,063

Adjusted EBITDAX (Non-GAAP)^(b)(c)

$

341,393

$

318,402

$

1,151,101

$

843,963

^(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 9 for a discussion around our uses of non-GAAP measures.

^(c) 

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

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF DISCRETIONARY CASH FLOW AND FREE CASH FLOW

(Unaudited)

Three Months Ended

December 31,

($ in thousands)

2019

Net Cash Provided by Operating Activities

$

220,908

Adjustments to reconcile Net Cash Provided by Operating Activities to Discretionary Cash Flow:

Increase in accounts receivable and other assets

44,958

Decrease in accounts payable, liabilities and other

42,281

Discretionary Cash Flow (Non-GAAP)^(a)(b)

308,147

Adjustments to reconcile Discretionary Cash Flow to Free Cash Flow:

Drilling and completion costs

(235,338)

Acquisitions of natural gas and oil properties

(55,860)

Free Cash Flow (Non-GAAP)^(b)(c)

$

16,949

^(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 9 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.