Montage Resources Trims Another $45M Off 2020 Capex Budget
In February Montage Resources said in 2020 it will increase production approximately 6% over 2019 while slicing its capital expenditure budget by 44%, to $190-$210 million for the year (see Montage Resources 2020 Sneak Preview: More OH Marcellus Drilling). That was BC, before coronavirus. It’s now AD, after (oil price) disaster, and the company has just announced it will decrease capex spending by another $45 million. To be fair, the company does not specifically blame either the coronavirus or the oil price shock for its actions. In a statement, the company says it continues to “monitor market conditions” and adjust accordingly. However, there is a big change in drilling strategy coming…
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Montage Resources, the company that resulted after the merger of Eclipse Resources with Blue Ridge Mountain Resources one year ago, issued an announcement on Monday with two important pieces of news. One is that the company has renegotiated a deal with the company that gathers the natural gas from its wells, merging a bunch of separate agreements into a single new agreement. The implied message is that Montage will save significant money. Second, the company has most of its natural gas production hedged for the balance of 2020, preselling it for $2.63/Mcf. They’ve also hedged some of their 2021 production–at a slightly lower price.
The value of a company’s stock price is important, for a variety of reasons. The stock price reflects investor confidence in whether the company can earn its keep and grow profits in the future. A higher stock price wards off takeovers. Upper management gets a raise. And the company can borrow money when it needs to at reasonable interest rates. All sorts of reasons why the stock price is important. Unfortunately for top drillers in the Marcellus/Utica, their stock prices have tanked. As a group, and individually, the stock price is either near or even at the lowest it’s *ever been.* Let that sink in.
Montage Resources provided a sneak preview yesterday for what to expect in 2020. You may recall Montage is the name of the company that resulted after the merger of Eclipse Resources with Blue Ridge Mountain Resources 11 months ago (see 
EnCap Investments is a venture capital investor that funds independent companies in the U.S. oil and gas industry. EnCap has its fingers in a number of pies in the Marcellus/Utica. According to a Bloomberg article, EnCap plans to use a pile of $6 billion in cash it’s sitting on to drill new oil and natural gas wells this year. EnCap currently runs 23 drilling rigs at its various portfolio companies. Two of those companies drill in the Marcellus/Utica.
Montage Resources, which formed in a merger of Eclipse Resources and Blue Ridge Mountain Resources (formerly Magnum Hunter Resources) in March of this year, announced in July they would cut back from two to one active drilling rig in the second half of 2019 (see 
The federal Bureau of Land Management (BLM) recently announced the winners of Utica Shale mineral rights for 14 parcels of land, adding up to ~655 acres, located in Wayne National Forest (WNF). The 14 properties netted the government $1.326 million and all 14 were purchased by two (possibly more) Utica Shale drillers. Average price per acre paid across the entire lot: $2,024. Who did the leasing? You have to be a subscriber to find out. 🙂
This is a momentous occasion, nearly 13 years in the making. The Ohio Dept. of Natural Resources (ODNR) issued permits on June 28 to drill two Utica Shale wells in Monroe County. Both wells begin on privately owned land, but then travel under sections of Wayne National Forest (WNF). As near as we can tell, these are the first two such wells to pass under WNF land. Below we tell you exactly where they’re located, and which company received the permits to drill them.
The former Blue Ridge Mountain Resources (formerly Magnum Hunter Resources) and Eclipse Resources tied the knot and merged at the end of February, promptly renaming itself Montage Resources (see 
Yesterday was an eventful day for the former Blue Ridge Mountain Resources (nee Magnum Hunter Resources) and Eclipse Resources. We’ve been telling you since last August that the two companies are merging, with Blue Ridge Mountain essentially buying out Eclipse. The deal is done as of yesterday and there is A LOT of news to share–including a name change for the newly combined entity.