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Penn Virginia Second Quarter 2020 Results

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   |    Thursday,August 06,2020

Penn Virginia Corp. announced its financial and operational results for the second quarter 2020.

Recent Significant Highlights

  • Generated net cash provided by operating activities of $56.4 million and free cash flow ("FCF")(1) of $6.6 million for the second quarter of 2020 and expects to generate significant FCF(1) for 2020;
  • Produced 18,888 barrels of oil per day ("BOPD") and 24,617 barrels of oil equivalent per day ("BOEPD") for the second quarter of 2020;
  • Realized oil price for the second quarter of 2020 of $23.97 per barrel and $50.37 per barrel including hedge settlements;
  • Reported net loss of $94.7 million (includes a non-cash impairment of oil and gas properties of $35.5 million and non-cash unrealized losses on derivatives of $79.6 million), or $6.24 per share, and adjusted net income(2) of $19.6 million, or $1.29 per diluted share, for the second quarter of 2020;
  • Generated adjusted EBITDAX(3) of $66.4 million for the second quarter of 2020;
  • Reduced accounts payable by approximately $45 million in the second quarter of 2020;
  • Estimated proved reserves were 123.1 million barrels of oil equivalent ("MMBOE") with a standardized measure of $936.8 million and an SEC PV-10 value(4) of $967.9 million as of August 1, 2020;
  • Estimated proved developed reserves were 54.7 MMBOE with a standardized measure of $705.6 million and PV-10 value(4) of $708.7 million at SEC pricing and $726.0 million (at strip pricing as of August 5, 2020 see Appendix); and
  • Recorded a mark-to-market value of the Company's commodity hedge position of approximately $32 million as of August 5, 2020.

John A. Brooks, President and Chief Executive Officer of Penn Virginia, said: "Our second quarter results represent another outstanding achievement for Penn Virginia. We posted strong realized pricing in part due to our ability to store production. This storage provided us the option to delay selling our production until prices had recovered from their record lows. Our realized hedge book gains also contributed significantly to our high realized price of over $50 per barrel. The second quarter represents the third consecutive quarter in which we have been free cash flow positive. I would like to extend my thanks to the employees of Penn Virginia for their ongoing efforts to work hard while we take efforts to keep them healthy and safe. They have kept us operating efficiently and are largely responsible for the solid second quarter results."

Mr. Brooks added, "Looking ahead, we expect to generate positive free cash flow for the remainder of the year and plan to use that free cash flow to continue to reduce debt. We will remain focused on capital discipline, preservation of our strong balance sheet, and cash on cash returns."

Second Quarter 2020 Operating Results

Total production for the second quarter of 2020 was 2.24 MMBOE, or 24,617 BOEPD (77% crude oil). During the second quarter of 2020, the Company did not spud any wells but turned to sales three gross (2.8 net) wells.

Second Quarter 2020 Financial Results

Operating expenses were $97.9 million (includes a non-cash impairment of oil and gas properties of $35.5 million), or $43.72 per barrel of oil equivalent ("BOE"), in the second quarter of 2020. Total cash direct operating expenses, which consist of lease operating expenses ("LOE"), gathering, processing, and transportation ("GPT") expenses, production and ad valorem taxes, and cash general and administrative ("G&A") expenses, were $24.4 million, or $10.87 per BOE, in the second quarter of 2020. Total G&A expenses for the second quarter of 2020 were $3.56 per BOE, which included $1.0 million of non-cash share-based compensation. For the second quarter of 2020, adjusted cash G&A expenses(5), which excludes non-cash share-based compensation, were $3.14 per BOE. LOE was $4.06 per BOE for the second quarter of 2020.

Net loss for the second quarter of 2020 was $94.7 million (includes a non-cash impairment of oil and gas properties of $35.5 million and non-cash unrealized losses on derivatives of $79.6 million), or $6.24 per share, compared to a net income of $51.6 million, or $3.40 per diluted share, in the second quarter of 2019. Adjusted net income(2) was $19.6 million, or $1.29 per diluted share, in the second quarter of 2020 versus $31.5 million, or $2.08 per diluted share in the second quarter of 2019.

Adjusted EBITDAX(3) was $66.4 million in the second quarter of 2020, compared to $86.7 million in the second quarter of 2019, down primarily due to the effect of lower oil prices.

During the second quarter of 2020, the Company incurred $10.7 million of capital expenditures, of which 95% was associated with drilling and completion capital.

As of June 30, 2020, the Company had a net debt to LTM Adjusted EBITDAX ratio of approximately 1.65x(6).

Acreage

As of June 30, 2020, the Company had approximately 99,000 gross (86,500 net) acres. Approximately 92% of Penn Virginia's acreage is held by production.

Proved Reserves

As of August 1, 2020, Penn Virginia's total proved reserves were approximately 123.1 MMBOE, of which 54.7 MMBOE were proved developed ("PD") reserves. The proved reserves were calculated in accordance with the Securities and Exchange Commission ("SEC") guidelines using the first day of the month prices for the last 12 months, resulting in pricing of $45.78 per barrel for crude oil and $2.06 per MMBtu for natural gas.

The Company's standardized measure of total proved reserves was $936.8 million, and the standardized measure of PD reserves was $705.6 million as of August 1, 2020. The value of the Company's total proved reserves, utilizing the SEC price guidelines, discounted at 10% and before tax ("PV-10")(4), was $967.9 million as of August 1, 2020.

The PV-10 value(4) of the Company's PD reserves utilizing the SEC price guidelines was $708.7 million as of August 1, 2020. Using strip pricing as of August 5, 2020 (see the Appendix of this release for pricing information), the PV-10(4) of the Company's PD reserves was $726.0 million before giving effect to hedges.

As of August 1, 2020, Penn Virginia had cash of $10.5 million and total debt of $534.4 million. The ratio of the PV-10(4) of the Company's PD reserves using strip pricing as of August 5, 2020, after giving effect to the Company's hedge value of approximately $32 million, to the Company's net debt(7) at August 1, 2020 of approximately $523.9 million, is approximately 1.45x(8).

Outlook

The table below sets forth the Company's operational and financial guidance:

  3Q 2020  
     
Production (BOPD) 17,000 19,000  
     
Capital Expenditures (millions) $11 $15  
     

Guidance reflects completion of the Company's five remaining drilled uncompleted ("DUC") wells during the third quarter of 2020.


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