ASCENT RESOURCES UTICA HOLDINGS, LLC REPORTS FIRST QUARTER OPERATING AND FINANCIAL RESULTS

Published: May. 10, 2022 at 3:45 PM EDT

First Quarter Highlights:

  • Net production averaged 2.0 bcfe per day for the quarter, a 9% increase over the first quarter of 2021
  • Realized pre-hedge natural gas equivalent price of $5.32 per mcfe, a $0.37 premium to NYMEX pricing
  • Generated Adjusted EBITDAX(1) of $280 million and net cash flow provided by operating activities of $282 million for the quarter
  • Incurred $199 million of D&C costs and $31 million of acquisition and leasehold costs during the quarter
  • Executed a $300 million hedge restructuring in April that materially increased the weighted average strike price of our natural gas swaps for the remainder of 2022
  • Reaffirmed our borrowing base at $1.85 billion in April

(1)

A non-GAAP financial measure.  See the Non-GAAP reconciliations included in this press release for the definition of, and other important information regarding, this non-GAAP financial measure.



OKLAHOMA CITY, May 10, 2022 /PRNewswire/ -- Ascent Resources Utica Holdings, LLC ("Ascent", "our" or the "Company") today reported its first quarter 2022 operating and financial results.  Additionally, Ascent announced a conference call with analysts and investors scheduled for 9 AM CT / 10 AM ET, Wednesday, May 11, 2022.  For more detailed information on Ascent, please refer to the latest investor presentation and additional information located on our website at https://www.ascentresources.com/investors.

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Commenting on first quarter performance, Ascent's Chairman and Chief Executive Officer, Jeff Fisher said, "The team had a strong start to the year, with production averaging 2.0 bcfe/d while generating $280 million of Adjusted EBITDAX during the first quarter. The business continues to be anchored by our strong operational execution, which is now being further propelled by a structural shift in natural gas fundamentals. We believe that, taken together, these key attributes make a compelling case for Ascent's long-term value proposition."

Fisher continued, "The hedge restructuring is another avenue that allows us to accelerate balance sheet improvement. As we move forward, we will continue to evaluate opportunities that allow us to create value through our best-in-class operational execution and capital efficiency while maintaining our commitment to responsible operations in order to maximize returns and improve our financial metrics."

First Quarter 2022 Financial Results

First quarter 2022 net production averaged 1,955 mmcfe per day, consisting of 1,821 mmcf per day of natural gas, 6,933 bbls per day of oil and 15,456 bbls per day of natural gas liquids ("NGL").

First quarter 2022 price realizations, including the impact of settled derivatives, were $3.23 per mcfe. Excluding the impact of settled derivatives, price realizations were $5.32 per mcfe in the first quarter of 2022.

For the first quarter of 2022, Ascent reported a net loss of $1.6 billion, Adjusted Net Income of $81 million and Adjusted EBITDAX of $280 million. During the first quarter of 2022, the net loss was largely driven by a $1.6 billion unrealized commodity derivative fair value loss primarily due to an increase in the forward strip for natural gas. Ascent incurred $240 million of total capital expenditures in the first quarter of 2022 including $199 million for well costs, $31 million for acquisition and leasehold costs, and $10 million for capitalized interest.

Balance Sheet and Liquidity

As of March 31, 2022, Ascent had total debt outstanding of approximately $2.6 billion, with $460 million of borrowings and $169 million of letters of credit issued under the revolving credit facility. Liquidity as of March 31, 2022 was $1.2 billion, comprised of $1.2 billion of available borrowing capacity under the revolving credit facility and $6 million of cash on hand. Our leverage ratio at the end of the quarter was 2.3x based on LQA Adjusted EBITDAX and 2.4x based on LTM Adjusted EBITDAX.

In April 2022, Ascent's borrowing base was reaffirmed at $1.85 billion pursuant to the regularly scheduled semiannual borrowing base redetermination under our credit agreement.

Operational Update

During the first quarter of 2022, Ascent operated four drilling rigs and two fracture stimulation crews. The Company spud 17 operated wells, hydraulically fractured 19 wells, and turned in line 10 wells with an average lateral length of approximately 15,500 feet. As of March 31, 2022, Ascent had 677 gross operated producing Utica wells.

Well costs averaged approximately $636 per lateral foot during the first quarter of 2022, in line with internal expectations. We employed two fracture stimulation crews during the first quarter, which will accelerate turn-in-line activity in the second and third quarters. However, this level of activity on the completion side resulted in increased costs and lower efficiencies as the second crew was not deployed on a continuous basis. The Company continues to execute at a high level, but additional inflationary pressures are becoming more prevalent, including commodity prices and labor. We are actively evaluating this situation for potential impacts to both our capital budget and development plan.

Hedging Update

Subsequent to quarter end, Ascent executed on $300 million of hedge restructurings to increase the weighted average strike price from $2.75 to $3.57 per mmbtu on certain existing natural gas swap contracts in place for the remainder of 2022, with no change to volumes hedged. This restructuring is expected to substantially increase 2022 Adjusted EBITDAX and Adjusted Free Cash Flow while reducing our year-end 2022 leverage ratio.

About Ascent Resources

Ascent is one of the largest private producers of natural gas in the United States and is focused on acquiring, developing, and operating natural gas and oil properties located in the Utica Shale in southern 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.

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



March 31,

($ in thousands)


2022


2021






Revenues:





     Natural gas


$       812,878


$       430,198

     Oil


54,366


41,958

     NGL


69,497


55,532

     Commodity derivative loss


(1,995,560)


(98,670)

          Total Revenues


(1,058,819)


429,018

Operating Expenses:





     Lease operating expenses


27,827


21,154

     Gathering, processing and transportation expenses


231,125


220,671

     Taxes other than income


10,522


9,040

     Exploration expenses


18,409


18,493

     General and administrative expenses


19,843


16,569

     Depreciation, depletion and amortization


152,279


139,456

          Total Operating Expenses


460,005


425,383

Income (Loss) from Operations


(1,518,824)


3,635

Other Income (Expense):





     Interest expense, net


(44,965)


(41,457)

     Change in fair value of contingent payment right


(7,980)


(5,446)

     Other income


682


348

          Total Other Expense


(52,263)


(46,555)

Net Loss


$  (1,571,087)


$       (42,920)

ASCENT RESOURCES UTICA HOLDINGS, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)




March 31,


December 31,

($ in thousands)


2022


2021






Current Assets:





     Cash and cash equivalents


$           6,054


$           5,674

     Accounts receivable – natural gas, oil and NGL sales


399,306


453,464

     Accounts receivable – joint interest and other


7,908


8,309

     Short-term derivative assets


221


6,866

     Other current assets


10,650


9,012

          Total Current Assets


424,139


483,325

Property and Equipment:





     Natural gas and oil properties, based on successful efforts accounting


9,605,634


9,383,879

     Other property and equipment


37,061


36,318

     Less: accumulated depreciation, depletion and amortization


(3,377,960)


(3,225,844)

          Property and Equipment, net


6,264,735


6,194,353

Other Assets:





     Long-term derivative assets


1,517


522

     Other long-term assets


38,431


46,241

          Total Assets


$    6,728,822


$    6,724,441






Current Liabilities:





     Accounts payable


$         59,805


$         86,812

     Accrued interest


51,654


45,929

     Short-term derivative liabilities


1,913,870


648,873

     Other current liabilities


515,643


517,953

          Total Current Liabilities


2,540,972


1,299,567

Long-Term Liabilities:





     Long-term debt, net


2,556,825


2,588,248

     Long-term derivative liabilities


791,034


435,022

     Other long-term liabilities


113,395


104,796

          Total Long-Term Liabilities


3,461,254


3,128,066

Member's Equity


726,596


2,296,808

          Total Liabilities and Member's Equity


$    6,728,822


$    6,724,441

ASCENT RESOURCES UTICA HOLDINGS, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)




Three Months Ended



March 31,

($ in thousands)


2022


2021






Cash Flows from Operating Activities:





Net loss


$  (1,571,087)


$       (42,920)

Adjustments to reconcile net loss to net cash provided by operating activities:





     Depreciation, depletion and amortization


152,279


139,456

     Change in fair value of commodity derivatives


1,628,397


77,659

     Change in fair value of interest rate derivatives


(1,738)


(139)

     Impairment of unproved natural gas and oil properties


17,858


17,394

     Non-cash interest expense


4,859


4,686

     Stock-based compensation


875


1,083

     Change in fair value of contingent payment right


7,980


5,446

     Other



3,463

     Changes in operating assets and liabilities


42,607


4,218

          Net Cash Provided by Operating Activities


282,030


210,346

Cash Flows from Investing Activities:





     Drilling and completion costs


(208,610)


(110,551)

     Acquisitions of natural gas and oil properties


(37,235)


(20,601)

     Additions to other property and equipment


(589)


(93)

          Net Cash Used in Investing Activities


(246,434)


(131,245)

Cash Flows from Financing Activities:





     Proceeds from credit facility borrowings


845,000


325,000

     Repayment of credit facility borrowings


(880,000)


(390,000)

     Repayment of long-term debt



(12,781)

     Cash paid for debt issuance costs



(447)

     Commodity derivative settlements



(3,456)

     Other


(216)


(226)

          Net Cash Used in Financing Activities


(35,216)


(81,910)

Net Increase (Decrease) in Cash and Cash Equivalents


380


(2,809)

Cash and Cash Equivalents, Beginning of Period


5,674


8,843

Cash and Cash Equivalents, End of Period


$           6,054


$           6,034

ASCENT RESOURCES UTICA HOLDINGS, LLC

NATURAL GAS, OIL AND NGL PRODUCTION AND PRICES

(Unaudited)




Three Months Ended



March 31,



2022


2021






Net Production Volumes:





     Natural gas (mmcf)


163,886


143,967

     Oil (mbbls)


624


840

     NGL (mbbls)


1,391


2,028

     Natural Gas Equivalents (mmcfe)


175,980


161,171






Average Daily Net Production Volumes:





     Natural gas (mmcf/d)


1,821


1,600

     Oil (mbbls/d)


7


9

     NGL (mbbls/d)


15


23

     Natural Gas Equivalents (mmcfe/d)


1,955


1,791

          % Natural Gas


93 %


89 %

          % Liquids


7 %


11  %






Average Sales Prices:





     Natural gas ($/mcf)


$        4.96


$        2.99

     Oil ($/bbl)


$      87.13


$      49.95

     NGL ($/bbl)


$      49.96


$      27.38






     Natural Gas Equivalents ($/mcfe)


$        5.32


$        3.27

     Settlements of commodity derivatives ($/mcfe)


(2.09)


(0.13)

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


$        3.23


$        3.14

ASCENT RESOURCES UTICA HOLDINGS, LLC

CAPITAL EXPENDITURES INCURRED

(Unaudited)




Three Months Ended



March 31,

($ in thousands)


2022


2021






Capital Expenditures Incurred:





     Drilling and completion costs incurred


$      198,378


$       126,491

     Acquisition and leasehold costs incurred


31,236


8,402

     Capitalized interest incurred


9,999


13,303

          Total Capital Expenditures Incurred


$      239,613


$       148,196

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF ADJUSTED NET INCOME (LOSS)

(Unaudited)




Three Months Ended



March 31,

($ in thousands)


2022


2021






Net Loss (GAAP)


$  (1,571,087)


$        (42,920)

Adjustments to reconcile net loss to Adjusted Net Income:





     Impairment of unproved natural gas and oil properties


17,858


17,394

     Change in fair value of commodity derivatives


1,628,397


77,659

     Change in fair value of interest rate derivatives


(1,738)


(139)

     Change in fair value of contingent payment right


7,980


5,446

     Stock-based compensation


875


1,083

     Other


(1,784)


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


$         80,501


$         58,523

(a)

As shown above and on the following pages, Ascent uses Adjusted Net Income (Loss), Adjusted EBITDAX, Last Twelve Months ("LTM") Adjusted EBITDAX, Last Quarter Annualized ("LQA") Adjusted EBITDAX, Net Debt, and Adjusted 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 and lenders, 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 or used in operating, investing and financing activities or other income or cash flow statement data prepared in accordance with 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 terms, 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 or amount 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 (Loss)" as net income (loss) before impairment of unproved natural gas and oil properties; change in fair value of commodity derivatives; change in fair value of interest rate derivatives; change in fair value of contingent payment right; stock-based compensation; and other non-recurring items.  Adjusted Net Income is a supplemental measure of operating performance monitored by management that is not defined under GAAP and does not represent, and should not be considered as, an alternative to net income (loss), as determined by GAAP.

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF ADJUSTED EBITDAX AND NET DEBT

(Unaudited)


Adjusted EBITDAX




Three Months Ended



March 31,

($ in thousands)


2022


2021






Net Loss (GAAP)


$  (1,571,087)


$        (42,920)

Adjustments to reconcile net loss to Adjusted EBITDAX:





     Exploration expenses


18,409


18,493

     Depreciation, depletion and amortization


152,279


139,456

     Interest expense, net


44,965


41,457

     Change in fair value of commodity derivatives


1,628,397


77,659

     Change in fair value of contingent payment right


7,980


5,446

     Stock-based compensation


875


1,083

     Other


(1,784)


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


$       280,034


$       240,674



(a)

See footnote (a) on the Reconciliations of Adjusted Net Income (Loss) for a discussion around our uses of non-GAAP measures.



(b)

Ascent defines "Adjusted EBITDAX" as net income (loss) before exploration expenses; depreciation, depletion and amortization; interest expense, net; change in fair value of commodity derivatives; change in fair value of contingent payment right; stock-based compensation; and other non-recurring items.  Adjusted EBITDAX is a supplemental measure of operating performance monitored by management that is not defined under GAAP and does not represent, and should not be considered as, an alternative to net income (loss), as determined by GAAP.

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF ADJUSTED EBITDAX AND NET DEBT (CONTINUED)

(Unaudited)


LTM Adjusted EBITDAX




Three Months

Ended


Twelve Months
Ended













March 31,


December 31,


September 30,


June 30,


March 31,











($ in thousands)


2022


2021


2021


2021


2022











Net Income (Loss) (GAAP)


$ (1,571,087)


$  1,110,012


$ (1,256,435)


$    (616,942)


$  (2,334,452)











Adjustments to reconcile net income (loss) to Adjusted EBITDAX:





















     Exploration expenses


18,409


26,061


22,274


16,539


83,283











     Depreciation, depletion and amortization


152,279


159,286


151,902


147,763


611,230











     Interest expense, net


44,965


47,034


44,996


41,353


178,348











     Change in fair value of commodity derivatives


1,628,397


(1,066,801)


1,284,758


624,760


2,471,114











     Change in fair value of contingent payment right


7,980


(407)


1,544


13,338


22,455











     Losses on purchases or exchanges of debt





3,822


3,822











     Stock-based compensation


875


815


816


902


3,408











     Non-recurring legal expense



1,372




1,372











     Other


(1,784)


5,847




4,063











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


$      280,034


$     283,219


$     249,855


$     231,535


$   1,044,643



































Three Months

Ended


Twelve Months
Ended













March 31,


December 31,


September 30,


June 30,


March 31,











($ in thousands)


2021


2020


2020


2020


2021











Net Income (Loss) (GAAP)


$       (42,920)


$     168,636


$    (552,389)


$    (291,046)


$     (717,719)











Adjustments to reconcile net income (loss) to
Adjusted EBITDAX:





















     Exploration expenses


18,493


26,323


28,096


22,858


95,770











     Depreciation, depletion and amortization


139,456


162,431


196,232


202,446


700,565











     Interest expense, net


41,457


35,791


33,292


31,245


141,785











     Change in fair value of commodity derivatives


77,659


(202,620)


500,175


239,847


615,061











     Change in fair value of contingent payment right


5,446


6,518




11,964











     Losses on purchases or exchanges of debt



15,708


3,632


190


19,530











     Stock-based compensation


1,083


1,065


710



2,858











     Non-recurring legal expense





5,572


5,572











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


$      240,674


$     213,852


$     209,748


$     211,112


$       875,386













(a)

See footnote (a) on the Reconciliations of Adjusted Net Income (Loss) for a discussion around our uses of non-GAAP measures.



(b)

Ascent defines "Adjusted EBITDAX" as net income (loss) before exploration expenses; depreciation, depletion and amortization; interest expense, net; change in fair value of commodity derivatives; change in fair value of contingent payment right; stock-based compensation; and other non-recurring items.  Adjusted EBITDAX is a supplemental measure of operating performance monitored by management that is not defined under GAAP and does not represent, and should not be considered as, an alternative to net income (loss), as determined by GAAP.

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF ADJUSTED EBITDAX AND NET DEBT (CONTINUED)

(Unaudited)


Net Debt, Net Debt to LTM Adjusted EBITDAX and Net Debt to LQA Adjusted EBITDAX




March 31,

($ in thousands)


2022


2021






Net Debt:





     Total debt


$ 2,556,825


$ 2,645,558

     Less: cash and cash equivalents


6,054


6,034

Net Debt(a)


$ 2,550,771


$ 2,639,524






Net Debt to LTM Adjusted EBITDAX:





     Net Debt(a)


$ 2,550,771


$ 2,639,524

     LTM Adjusted EBITDAX (Non-GAAP)(b)


$ 1,044,643


$     875,386

     Net Debt to LTM Adjusted EBITDAX


                2.4 x


                3.0 x






Net Debt to LQA Adjusted EBITDAX:





     Net Debt(a)


$ 2,550,771


$ 2,639,524

     LQA Adjusted EBITDAX (Non-GAAP)


$ 1,120,136


$     962,696

     Net Debt to LQA Adjusted EBITDAX


                2.3 x


                2.7 x



(a)

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 our cash and cash equivalents on hand.  Net Debt does not represent, and should not be considered as, an alternative to total debt, as determined by GAAP.



(b)

Adjusted EBITDAX for the LTM ended March 31, 2022 and 2021, respectively. Refer to our Reconciliations of Adjusted EBITDAX and Net Debt for more details regarding our LTM Adjusted EBITDAX calculations.

ASCENT RESOURCES UTICA HOLDINGS, LLC

RECONCILIATIONS OF ADJUSTED FREE CASH FLOW

(Unaudited)




Three Months Ended



March 31,

($ in thousands)


2022


2021






Net Cash Provided by Operating Activities (GAAP)


$       282,030


$       210,346

Adjustments to reconcile Net Cash Provided by Operating Activities to Adjusted Free Cash Flow:





     Changes in operating assets and liabilities


(42,607)


(4,218)

     Drilling and completion costs incurred


(198,378)


(126,491)

     Acquisition and leasehold costs incurred


(31,236)


(8,402)

     Capitalized interest incurred


(9,999)


(13,303)

     Financing commodity derivative settlements



(3,456)

     Other


(1,784)


Adjusted Free Cash Flow (Non-GAAP)(a)(b)


$          (1,974)


$         54,476



(a)

See footnote (a) on the Reconciliations of Adjusted Net Income (Loss) for a discussion around our uses of non-GAAP measures.



(b)

Adjusted 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 "Adjusted Free Cash Flow" as net cash provided by operating activities adjusted for changes in operating assets and liabilities; drilling and completion costs incurred; acquisition and leasehold costs incurred; capitalized interest incurred; financing commodity derivative settlements; and certain other non-recurring items.  Adjusted Free Cash Flow is a supplemental measure of liquidity monitored by management that is not defined under GAAP and that does not represent, and should not be considered as, an alternative to net cash provided by operating activities, as determined by GAAP.



Contact:
Chris Benton
Director – Finance and Investor Relations
405-252-7850
chris.benton@ascentresources.com

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