Ascent Resources Posts Net Loss of $617 Million for 2Q 2021

Oklahoma City-based Ascent Resources Utica Holdings, LLC reported its second quarter 2021 operating and financial results and reaffirmed its 2021 guidance on Wednesday, according to a company press release.

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

“The team has delivered on another quarter of solid operational and financial results,” said Jeff Fisher, Ascent’s Chairman and Chief Executive Officer. “We successfully turned in line 26 new wells while incurring $156 million of total capital expenditures. This activity increased our base production profile and further optimized margins, which in turn, allowed us to achieve strong financial results, generating $38 million of free cash flow during the quarter. Moving into the second half of the year, Ascent is positioned to benefit from a strong macro environment while continuing to generate sustainable free cash flow to reduce debt and create value for all of our stakeholders.”

Second quarter 2021 net production averaged 1,945 mmcfe per day, consisting of 1,768 mmcf per day of natural gas, 9,418 bbls per day of oil and 20,110 bbls per day of natural gas liquids (“NGL”).

Second quarter 2021 price realizations, including the impact of settled derivatives, were $2.88 per mcfe. Excluding the impact of settled derivatives, price realizations were $3.11 per mcfe in the second quarter of 2021.

For the second quarter of 2021, Ascent reported a net loss of $617 million, adjusted net income of $42 million and adjusted EBITDAX of $231 million. The net loss was driven by a $625 million unrealized commodity derivative fair value loss primarily due to an increase in the forward strip for natural gas during the second quarter of 2021. Ascent incurred $156 million of total capital expenditures in the second quarter of 2021 including $134 million for well costs, $9 million for acquisition and leasehold costs, and $13 million for capitalized interest. The company generated $38 million of free cash flow in the second quarter of 2021.

Net production for the six months ended June 30, 2021 averaged 1,868 mmcfe per day, consisting of 1,684 mmcf per day of natural gas, 9,376 bbls per day of oil and 21,315 bbls per day of NGLs.

Price realizations, including the impact of settled derivatives, were $3.01 per mcfe for the six months ended June 30, 2021. Excluding the impact of derivatives, price realizations were $3.19 per mcfe for the year-to-date period.

For the six months ended June 30, 2021, Ascent reported a net loss of $660 million, adjusted net income of $100 million and adjusted EBITDAX of $472 million. The net loss was driven by a $702 million unrealized commodity derivative fair value loss primarily due to an increase in the forward strip for natural gas during the six months ended June 30, 2021. Ascent incurred a total of $304 million of capital expenditures during the six months ended June 30, 2021 including $260 million for well costs, $18 million for acquisition and leasehold costs, and $26 million for capitalized interest. The company generated $92 million of free cash flow during the six months ended June 30, 2021.

As of June 30, 2021, Ascent had total debt outstanding of approximately $2.6 billion, with $543 million of borrowings and $169 million of letters of credit issued under our revolving credit facility. Liquidity at the end of the second quarter of 2021 was $1.15 billion, comprised of $1.14 billion of available borrowing capacity under the revolving credit facility and $10 million of cash on hand. Our leverage ratio at the end of the quarter was 2.9x.

During the second quarter of 2021, the company continued to improve the balance sheet through a series of transactions aimed at optimizing our debt profile, reducing collateral requirements and increasing liquidity in order to provide maximum financial flexibility in the current market. In June 2021, Ascent opportunistically accessed the debt market and issued $400 million of 5.875% senior notes due 2029 to repay borrowings outstanding under the revolving credit facility and to further enhance our liquidity position. In addition, the company successfully reduced its credit requirements with certain of our firm transportation providers.

During the second quarter of 2021, Ascent operated four drilling rigs and one fracture stimulation crew. The Company spud 23 operated wells, hydraulically fractured 17 wells, and turned in line 26 wells with an average lateral length of 12,247 feet. Of the 26 new wells brought online, 23 were located in the dry gas or lean gas areas, while the other three wells were located in the liquids-rich window. As of June 30, 2021, Ascent had 635 gross operated producing Utica wells.

Our well costs averaged approximately $546 per lateral foot during the second quarter of 2021, a 12% reduction compared to the second quarter of 2020, and below the low end of our full year guidance range. The company continues to execute at a high level and realize sustainable and repeatable efficiency gains while reducing drilling cycle times, increasing lateral feet developed and stages completed per day. Moving into the second half of the year, we expect our development costs to be in line with our previous guidance of between $550 and $575 per lateral foot.

Ascent has significant hedges in place in order to reduce exposure to the volatility in commodity prices, as well as to protect our expected operating cash flow. As of June 30, 2021, Ascent had hedged 1,505,000 mmbtu per day of natural gas production for the remainder of 2021, at approximately $2.56 per mmbtu ($2.74 per mcf). In addition, Ascent had also hedged 2,800 bbls per day of crude oil production at an average price of $53.36 per bbl for the remainder of 2021. We also have significant natural gas and oil hedges in place for 2022 and beyond (please reference our financials for additional detail).

 

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