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Montage (MR) to Curb Capex Keeping Volume Guidance Intact

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Montage Resources Corporation recently announced a decline in capital expenditure for 2020 due to current market uncertainty. With commodity prices now in the bearish territory since the coronavirus pandemic is hurting global energy demand, the outlook for exploration and production business seems gloomy. Thus, upstream energy players like Montage Resources are restricting operational activities and thereby reducing capital budget.

The company revised its 2020 capital budget guidance to $145-$165 million, reflecting a 23% decline from the original guided range of $190-$210 million. Notably, 90% of the budget will likely be directed toward drilling and completions activities. The company’s 2019 capital spending was recorded at $366.2 million, of which $339.7 million was directed toward drilling and completion activities, $25.9 million was used for land-related costs, and the rest for corporate-related expenditures.

The Zacks Rank #1 (Strong Buy) company intends to focus on the stacked play region in the Ohio Marcellus and Utica Dry gas areas for developmental activities. It will likely drill 12-16 gross horizontal wells with the current budget plan. Notably, 65% of the budget will likely be used in the first half of the year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company expects 2020 net production in the range of 570-590 million cubic feet natural gas equivalent per day (MMcfe/d). Of the total volumes, around 82% will be natural gas, while the rest will comprise natural gas liquids and crude oil. The net production guidance remains unchanged with the original one, but indicates an increase from the 2019 level of 547.8 MMcfe/d. A boost in production while drastically lowering capital spending reflects increasing efficiency in the company’s operations. Notably, for the first quarter, it expects production volumes in the range of 585-600 MMcfe/d, unchanged from the original guidance.

With the capex reduction move, Montage joins the bandwagon of other energy players including Pioneer Natural Resources Company (PXD - Free Report) , Apache Corporation (APA - Free Report) and Cimarex Energy Co. that intend to navigate through this tough phase, while sustaining a solid financial footing and strong operational efficiency.

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