Midstream - Storage | Drilling & Completions | Hedging | Capital Markets | Drilling Program - Wells | Curtailment/Shut-In

Penn Virginia's Borrowing Base Cut 20%; Curtails Production, Halts All D&C Activity

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   |    Friday,May 01,2020

Penn Virginia has reported several developments including a change to its borrowing base, production curtailments and updated hedges.

Borrowing Base Cut to $400MM (-20%)

Penn Virginia's borrowing base was lowered from $500MM to $400MM (down 20%).

Effective July 1, 2020, the borrowing base will be further reduced to $375 million, and from October 1, 2020 through the fall 2021 redetermination, the company must maintain at least $25 million of available capacity under its revolving credit facility.

 The maturity date remains May 2024.

Operational Update

• Halted all drilling and completion activity in early April of 2020;
  
  
• Deferred completion of eight wells until late this year;
  
  
• Secured approximately 250,000 barrels of oil storage (net of working capacity); and
  
  
• Evaluating further opportunities to lower cost structure.

Production Update

• Produced an estimated 20,665 barrels of oil per day and 26,740 barrels of oil equivalent per day in the first quarter of 2020; 
  
  
• Anticipating partial curtailment of production for May and June 2020; and
  
  
• Ninety-two percent of Penn Virginia’s acreage is held by production.

Hedge Update

• Restructured its put spread contracts for the second and third quarters of 2020 and added additional put contracts, over and above originally anticipated volumes, resulting in increasing free cash flow (“FCF”) (non-GAAP measure defined below) as near term oil prices liquidate below $30 (see section titled “Hedge Book” below for more details); and
  
  
• Recorded a mark-to-market value of the Company’s commodity hedge position of approximately $160 million as of April 29, 2020.

The table below sets forth Penn Virginia’s hedge positions as of April 30, 2020:

2020 Outlook

The Company will continue to monitor changes in commodity prices and may make additional necessary adjustments to its capital program. Therefore the Company’s previously issued 2020 guidance should no longer be relied upon. Penn Virginia continues to assess a wide range of further measures to maximize value in the prevailing commodity price environment, including curtailments of oil and gas production, until commodity prices improve.