Financial Results | Capital Markets

Penn Virginia Expects Q2 Output to Drop ~10% from Q1; Free Cash Flow Positive

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Penn Virginia Corp. detailed some of its preliminary Q2 2020 results.

Prelim Highlights:

• Estimated production for the second quarter of 2020 of between 18,500-18,900 BOPD and between 24,100-24,600 BOEPD - this is down 10% and 9%, respectively from Q1 2020

• Realized oil price for the second quarter of 2020 of approximately $23.97 per barrel and $50.37 per barrel including hedge settlements

• Completed three drilled uncompleted (DUC) wells in June 2020

• Estimated capital expenditures for the second quarter of 2020 of between $10.5 $12.5 million

• Reduced accounts payable by approximately $45 million in the second quarter of 2020

• Expect to be slightly free cash flow positive for the second quarter of 2020 and significantly FCF positive in the third quarter of 2020

• Current credit facility balance, net of cash, of approximately $315 million as of July 20, 2020

John A. Brooks, President and Chief Executive Officer of Penn Virginia commented, "We are extremely proud of our operational and financial results for the quarter, especially in light of the challenging market conditions. Given these conditions and our commitment to capital discipline, we shut down activity in early April, minimizing the amount of capital incurred during the second quarter. We also actively added put hedge contracts that allowed us to benefit from falling oil prices in the second quarter. These contracts helped the Company generate a realized oil price of over $50 per barrel as well as incremental cash flow, which we used to reduce payables and pay down debt. With respect to our production volumes, we proactively secured third party oil storage to give us the most operating flexibility possible. In early May, we recognized that the oil markets were in steep contango with June pricing, when taking effect of differentials, of approximately $20 per barrel higher than May. To take advantage of this dislocation in the market, Penn Virginia elected to store a significant portion of our May oil production, rather than fully shutting in. By utilizing our storage assets, we were able to capture that arbitrage and sell that production in June at much higher pricing. Additionally, due to the short-term nature of the production shut-in, our PDP wells are performing very well, and no degradation of those wells is evident.

"With our strong production profile and high realized pricing after taking into account substantial realized hedge gains, we will again be free cash flow positive for the second quarter. Since the beginning of the year, we have reduced the outstanding credit facility balance, net of cash on hand, by approximately $40 million. Given our current outlook, we expect to continue our free cash flow positive trend for the remainder of the year and plan to use that free cash flow to reduce debt further. As always, we remain focused on capital discipline and cash on cash returns."