Montage Resources Corp. has joined its Appalachian peers by announcing it will cut capital spending this year by nearly 50% from the midpoint of 2019 guidance.
The company issued a 2020 budget this week of $190-210 million, or a 44% decrease at the midpoint of the latest 2019 spending forecast of $357.5 million. Montage has not yet released its year-end financial results.
The company was formed early last year after a merger between Appalachian pure-plays Blue Ridge Mountain Resources and Eclipse Resources. Production has increased steadily since, and the company said it likely would remain unchanged this year. Production of 570-590 MMcfe/d is forecast for 2020, an increase of about 6% year/year.
“Management remains very focused on maintaining our balance sheet strength and building upon the financial progress made to date with continued efforts targeting commercial agreement negotiations, capital and expense cost reductions, and cycle time improvements in 2020,” said CEO John Reinhart.
Most of Appalachia’s leading producers already have announced spending cuts and lower growth rates for 2020 as gas prices have continued to fall since last year. Montage said it has 56% of this year’s natural gas production hedged at a weighted average floor price of $2.64/MMBtu. The strip shows gas well under $2.50 for the remainder of the year.
“As we progress into 2020, we will continue to monitor commodity prices and incremental development cost reductions in order to dynamically adjust our level of capital expenditures as necessary in order to preserve the financial strength of the company while targeting free cash flow generation,” Reinhart said.
The company also said it would focus primarily on its liquids-rich acreage in Ohio’s Marcellus Shale. This year’s production is still expected to consist of 80% natural gas and 20% oil and liquids.
Given the Utica’s performance in the state, operators have focused less on the Marcellus. Only 51 Marcellus wells have been drilled in Ohio, compared to 2,712 Utica wells. Montage started ramping up its activity in the play in 2019.
Montage plans to drill 17-20 gross wells and complete 18-22 gross wells this year. The company plans to drill about 65% of its wells in the Marcellus, with the remainder targeting the Utica.