ASCENT RESOURCES UTICA HOLDINGS, LLC REPORTS FOURTH QUARTER AND FULL-YEAR 2022 OPERATING AND FINANCIAL RESULTS AND ISSUES INITIAL 2023 GUIDANCE

⁽¹⁾

A non-GAAP financial measure.  See the Non-GAAP reconciliations included in this press release for the definition of, and other important information regarding, this non-GAAP financial measure.

⁽²⁾

Includes the full-year Adjusted EBITDAX impact of the XTO acquisition

⁽³⁾

SEC pricing

Initial 2023 Guidance

Production

Total Production (mmcfe/d)

2,000 - 2,100

% Natural Gas

89% - 91%

Differentials

Natural Gas ($/mcf)

($0.25) - ($0.15)

Crude Oil ($/bbl)

($9.00) - ($8.00)

NGL (% of WTI)

32.5% - 37.5%

Operating Expenses

Total Operating Expense⁽¹⁾

$1.45 - $1.55

G&A⁽²⁾

$0.08 - $0.09

Capital Expenditures Incurred ($mm)⁽³⁾

$920 - $955

D&C

$800 - $825

Land

$120 - $130

Operations / Well Counts

Operated Rigs

3.5 - 4.0

Wells Spud

70 - 75

Average Lateral Length

14,500'

⁽¹⁾

Includes GP&T, LOE, and Taxes Other than Income

⁽²⁾

Excludes long-term incentive compensation expense

⁽³⁾

Excludes capitalized interest

ASCENT RESOURCES UTICA HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2022

2021

2022

2021

Revenues:

Natural gas

$ 1,047,484

$    975,911

$ 4,700,531

$ 2,510,150

Oil

62,182

51,841

246,866

188,076

NGL

46,757

68,982

239,071

241,731

Commodity derivative gain (loss)

993,155

532,585

(2,687,817)

(1,743,892)

Total Revenues

2,149,578

1,629,319

2,498,651

1,196,065

Operating Expenses:

Lease operating expenses

27,640

22,499

101,659

81,822

Gathering, processing and transportation expenses

245,044

240,667

979,987

945,031

Taxes other than income

11,574

9,672

45,724

38,988

Exploration expenses

3,353

26,061

49,142

83,367

General and administrative expenses

23,477

15,357

77,112

58,334

Depreciation, depletion and amortization

181,519

159,286

676,053

598,407

Total Operating Expenses

492,607

473,542

1,929,677

1,805,949

Income (Loss) from Operations

1,656,971

1,155,777

568,974

(609,884)

Other Income (Expense):

Interest expense, net

(57,426)

(47,034)

(209,731)

(174,840)

Change in fair value of contingent payment right

(1,955)

407

(3,302)

(19,921)

Losses on purchases or exchanges of debt

—

—

—

(3,822)

Other income

3,409

862

5,438

2,182

Total Other Expense

(55,972)

(45,765)

(207,595)

(196,401)

Net Income (Loss)

$ 1,600,999

$ 1,110,012

$    361,379

$  (806,285)

ASCENT RESOURCES UTICA HOLDINGS, LLC
CONSOLIDATED BALANCE SHEETS
(Unaudited)

December 31,

($ in thousands)

2022

2021

Current Assets:

Cash and cash equivalents

$        3,894

$        5,674

Accounts receivable – natural gas, oil and NGL sales

530,385

453,464

Accounts receivable – joint interest and other

35,340

8,309

Short-term derivative assets

14,061

6,866

Other current assets

12,597

9,012

Total Current Assets

596,277

483,325

Property and Equipment:

Natural gas and oil properties, based on successful efforts accounting

10,558,533

9,383,879

Other property and equipment

39,641

36,318

Less: accumulated depreciation, depletion and amortization

(3,900,730)

(3,225,844)

Property and Equipment, net

6,697,444

6,194,353

Other Assets:

Long-term derivative assets

6,081

522

Other long-term assets

44,117

46,241

Total Assets

$ 7,343,919

$ 6,724,441

Current Liabilities:

Accounts payable

$      77,753

$      86,812

Accrued interest

50,375

45,929

Short-term derivative liabilities

684,204

648,873

Other current liabilities

771,062

517,953

Total Current Liabilities

1,583,394

1,299,567

Long-Term Liabilities:

Long-term debt, net

2,475,222

2,588,248

Long-term derivative liabilities

495,464

435,022

Other long-term liabilities

113,061

104,796

Total Long-Term Liabilities

3,083,747

3,128,066

Member's Equity

2,676,778

2,296,808

Total Liabilities and Member's Equity

$ 7,343,919

$ 6,724,441

ASCENT RESOURCES UTICA HOLDINGS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2022

2021

2022

2021

Cash Flows from Operating Activities:

Net income (loss)

$ 1,600,999

$ 1,110,012

$   361,379

$ (806,285)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion and amortization

181,519

159,286

676,053

598,407

(Gain) loss on commodity derivatives

(993,155)

(532,585)

2,687,817

1,743,892

Settlements of commodity derivatives

(339,328)

(534,216)

(1,868,139)

(812,328)

Impairment of unproved natural gas and oil properties

2,784

25,535

46,902

78,993

Non-cash interest expense

5,310

4,567

16,851

18,301

Long-term incentive compensation

8,780

815

22,745

3,616

Change in fair value of contingent payment right

1,955

(407)

3,302

19,921

Losses on purchases or exchanges of debt

—

—

—

3,810

Other

(36)

56

42

160

Changes in operating assets and liabilities

272,813

(27,886)

95,060

(87,850)

Net Cash Provided by Operating Activities

741,641

205,177

2,042,012

760,637

Cash Flows from Investing Activities:

Natural gas and oil capital expenditures

(226,648)

(156,185)

(962,335)

(597,671)

Cash paid for acquisition

—

—

(250,882)

—

Additions to other property and equipment

(559)

(1,115)

(2,096)

(1,444)

Net Cash Used in Investing Activities

(227,207)

(157,300)

(1,215,313)

(599,115)

Cash Flows from Financing Activities:

Proceeds from credit facility borrowings

725,000

850,000

4,245,000

2,100,000

Repayment of credit facility borrowings

(1,160,000)

(898,000)

(4,370,000)

(2,558,000)

Proceeds from issuance of long-term debt

—

—

—

400,000

Repayment of long-term debt

(2,970)

—

(2,970)

(84,173)

Cash paid for debt issuance and amendment costs

(3)

(8)

(16,855)

(7,229)

Cash paid for settlements of commodity derivatives

(80,359)

—

(378,270)

(11,188)

Cash paid to restructure commodity derivatives

—

—

(300,000)

—

Other

(332)

(249)

(5,384)

(4,101)

Net Cash Used in Financing Activities

(518,664)

(48,257)

(828,479)

(164,691)

Net Decrease in Cash and Cash Equivalents

(4,230)

(380)

(1,780)

(3,169)

Cash and Cash Equivalents, Beginning of Period

8,124

6,054

5,674

8,843

Cash and Cash Equivalents, End of Period

$       3,894

$       5,674

$       3,894

$       5,674

ASCENT RESOURCES UTICA HOLDINGS, LLC
NATURAL GAS, OIL AND NGL PRODUCTION AND PRICES
(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2022

2021

2022

2021

Net Production Volumes:

Natural gas (mmcf)

186,422

172,663

719,470

645,752

Oil (mbbls)

819

735

2,814

3,110

NGL (mbbls)

1,539

1,542

5,794

7,012

Natural Gas Equivalents (mmcfe)

200,572

186,324

771,119

706,484

Average Daily Net Production Volumes:

Natural gas (mmcf/d)

2,026

1,877

1,971

1,769

Oil (mbbls/d)

9

8

8

9

NGL (mbbls/d)

17

17

16

19

Natural Gas Equivalents (mmcfe/d)

2,180

2,025

2,113

1,936

% Natural Gas

93 %

93 %

93 %

91 %

% Liquids

7 %

7 %

7 %

9 %

Average Sales Prices:

Natural gas ($/mcf)

$   5.62

$   5.65

$   6.53

$   3.89

Oil ($/bbl)

$  75.92

$  70.53

$  87.73

$  60.47

NGL ($/bbl)

$  30.38

$  44.74

$  41.26

$  34.47

Natural Gas Equivalents ($/mcfe)

$   5.77

$   5.89

$   6.73

$   4.16

Settlements of commodity derivatives ($/mcfe)^(a)

(2.36)

(2.87)

(2.98)

(1.17)

Average sales price, after effects of settled derivatives ($/mcfe)

$   3.41

$   3.02

$   3.75

$   2.99

^(a) 

Excludes the one-time payment of $300 million in April 2022 to restructure a portion of our May through December 2022 natural gas swaps, resulting in an increase of our weighted average strike prices for these periods.

ASCENT RESOURCES UTICA HOLDINGS, LLC
CAPITAL EXPENDITURES INCURRED
(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2022

2021

2022

2021

Capital Expenditures Incurred:

Drilling and completion costs incurred

$      201,158

$      156,103

$   830,195

$    566,058

Land and leasehold costs incurred

16,890

19,738

95,947

57,714

Capitalized interest incurred

11,374

10,961

43,893

48,458

Total Capital Expenditures Incurred^(a)

$      229,422

$      186,802

$   970,035

$    672,230

^(a) 

Excludes the $250.9 million paid for the XTO acquisition.

ASCENT RESOURCES UTICA HOLDINGS, LLC
RECONCILIATIONS OF ADJUSTED NET INCOME (LOSS)
(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2022

2021

2022

2021

Net Income (Loss) (GAAP)

$ 1,600,999

$ 1,110,012

$    361,379

$   (806,285)

Adjustments to reconcile net income (loss) to Adjusted Net Income:

Impairment of unproved natural gas and oil properties

2,784

25,535

46,902

78,993

(Gain) loss on commodity derivatives

(993,155)

(532,585)

2,687,817

1,743,892

Commodity derivative settlements^(a)

(473,217)

(534,216)

(2,299,939)

(823,516)

Unrealized (gain) loss on interest rate derivatives

243

(213)

(4,859)

(570)

Change in fair value of contingent payment right

1,955

(407)

3,302

19,921

Long-term incentive compensation

8,780

815

22,745

3,616

Losses on purchases or exchanges of debt

—

—

—

3,822

Other operating expenses (benefits)

(59)

7,219

(6,760)

7,219

Deferred debt issuance costs write-off

—

—

1,977

—

Adjusted Net Income (Non-GAAP)^(b)(c)

$    148,330

$      76,160

$    812,564

$    227,092

^(a) 

Excludes the one-time payment of $300 million in April 2022 to restructure a portion of our May through December 2022 natural gas swaps, resulting in an increase of our weighted average strike prices for these periods.

^(b) 

As shown above and on the following pages, Ascent uses Adjusted Net Income (Loss), Adjusted EBITDAX, Last Twelve Months ("LTM") Adjusted EBITDAX, Last Quarter Annualized ("LQA") Adjusted EBITDAX, Net Debt, and Adjusted Free Cash Flow (non-GAAP measures) as supplemental measures to evaluate the performance of its assets.  Ascent believes these non-GAAP measures provide meaningful information to our investors and lenders, as discussed below.  These non-GAAP measures, as used and defined by Ascent, are not measures of performance as determined by United States generally accepted accounting principles (US GAAP) and may not be comparable to similarly titled measures employed by other companies.

Non-GAAP measures should not be considered in isolation or as substitutes for operating income, net income or loss, cash flows provided by or used in operating, investing and financing activities or other income or cash flow statement data prepared in accordance with GAAP.  Non-GAAP measures provide no information regarding a company's capital structure, borrowings, interest costs, capital expenditures and working capital movement.  Non-GAAP measures do not represent funds available for discretionary use because those funds may be required for debt service, capital expenditures, working capital, exploration expenses and other commitments and obligations.  However, Ascent's management team believes these non-GAAP measures are useful to an investor in evaluating Ascent's financial performance because these measures:

•

are widely used by investors in the natural gas and oil industry to measure a company's operating performance without regard to items excluded from the calculation of such terms, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors;

•

are more comparable to estimates used by analysts;

•

help investors to more meaningfully evaluate and compare the results of Ascent's operations from period to period by removing the effect of its capital structure from its operating structure;

•

excludes one-time items, non-cash items or items whose timing or amount cannot be reasonably estimated; and

•

are used by Ascent's management team for various purposes, including as a measure of operating performance, in presentations to its Board of Managers and as a basis for strategic planning and forecasting.

There are significant limitations to using non-GAAP measures as measures of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect Ascent's net income or loss, the lack of comparability of results of operations of different companies, and the different methods of calculating non-GAAP measures reported by different companies.

Ascent defines "Adjusted Net Income (Loss)" as net income (loss) before impairment of unproved natural gas and oil properties; the revenue impact of changes in the fair value of commodity derivative instruments prior to settlement; unrealized gain (loss) on interest rate derivatives; change in fair value of contingent payment right; long-term incentive compensation;  (gains) losses on purchases or exchanges of debt; and other operating expenses including changes in legal reserves, settlements and other items which affect the comparability of results or that are not indicative of trends in the ongoing business.  Adjusted Net Income is a supplemental measure of operating performance monitored by management that is not defined under GAAP and does not represent, and should not be considered as, an alternative to net income (loss), as determined by GAAP.

ASCENT RESOURCES UTICA HOLDINGS, LLC
RECONCILIATIONS OF ADJUSTED EBITDAX AND NET DEBT
(Unaudited)

Adjusted EBITDAX

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2022

2021

2022

2021

Net Income (Loss) (GAAP)

$ 1,600,999

$ 1,110,012

$    361,379

$   (806,285)

Adjustments to reconcile net income (loss) to Adjusted EBITDAX:

Exploration expenses

3,353

26,061

49,142

83,367

Depreciation, depletion and amortization

181,519

159,286

676,053

598,407

Interest expense, net

57,426

47,034

209,731

174,840

(Gain) loss on commodity derivatives

(993,155)

(532,585)

2,687,817

1,743,892

Commodity derivative settlements^(a)

(473,217)

(534,216)

(2,299,939)

(823,516)

Change in fair value of contingent payment right

1,955

(407)

3,302

19,921

Long-term incentive compensation^(b)

8,780

815

22,745

3,616

Losses on purchases or exchanges of debt

—

—

—

3,822

Other operating expenses (benefits)

(59)

7,219

(6,760)

7,219

Adjusted EBITDAX (Non-GAAP)^(c)(d)

$    387,601

$    283,219

$ 1,703,470

$ 1,005,283

^(a)

Excludes the one-time payment of $300 million in April 2022 to restructure a portion of our May through December 2022 natural gas swaps, resulting in an increase of our weighted average strike prices for these periods.

^(b)

The expense associated with the Long Term Incentive Plan Cash Award of $5.5 million and $16.9 million for the three months and year ended December 31, 2022, respectively, is non-cash to the Company as the Plan was established by our Parent, Ascent Resources, LLC.

^(c)

See footnote (a) on the Reconciliations of Adjusted Net Income (Loss) for a discussion of our uses of non-GAAP measures.

^(d)

Ascent defines "Adjusted EBITDAX" as net income (loss) before exploration expenses; depreciation, depletion and amortization; interest expense, net; the revenue impact of changes in the fair value of commodity derivative instruments prior to settlement; change in fair value of contingent payment right; long-term incentive compensation; (gains) losses on purchases or exchanges of debt; and other operating expenses including changes in legal reserves, settlements and other items which affect the comparability of results or that are not indicative of trends in the ongoing business. Adjusted EBITDAX is a supplemental measure of operating performance monitored by management that is not defined under GAAP and does not represent, and should not be considered as, an alternative to net income (loss), as determined by GAAP.

ASCENT RESOURCES UTICA HOLDINGS, LLC
RECONCILIATIONS OF ADJUSTED EBITDAX AND NET DEBT (CONTINUED)
(Unaudited)

Net Debt and Net Debt to LTM Adjusted EBITDAX

December 31,

($ in thousands)

2022

2021

Net Debt:

Total debt

$ 2,475,222

$ 2,588,248

Less: cash and cash equivalents

3,894

5,674

Net Debt^(a)

$ 2,471,328

$ 2,582,574

Net Debt to LTM Adjusted EBITDAX:

Net Debt^(a)

$ 2,471,328

$ 2,582,574

LTM Adjusted EBITDAX (Non-GAAP)^(b)

$ 1,703,470

$ 1,005,283

Net Debt to LTM Adjusted EBITDAX^(c)

            1.5 x

            2.6 x

^(a)

Ascent defines "Net Debt" as total debt less cash and cash equivalents. Management uses Net Debt to determine our outstanding debt obligations that would not be readily satisfied by our cash and cash equivalents on hand.  Net Debt does not represent, and should not be considered as, an alternative to total debt, as determined by GAAP.

^(b)

Refer to our Reconciliations of Adjusted EBITDAX and Net Debt for more details regarding our LTM Adjusted EBITDAX calculations. Only includes impact of XTO acquisition since August 5, 2022.

^(c)

Our Net Debt to LTM Adjusted EBITDAX was 1.4x as of December 31, 2022 when including the full-year EBITDAX impact of the XTO acquisition, as provided by our debt covenant calculations.

ASCENT RESOURCES UTICA HOLDINGS, LLC
RECONCILIATIONS OF ADJUSTED FREE CASH FLOW
(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2022

2021

2022

2021

Net Cash Provided by Operating Activities (GAAP)

$    741,641

$    205,177

$ 2,042,012

$    760,637

Adjustments to reconcile Net Cash Provided by Operating Activities to Adjusted Free Cash Flow:

Changes in operating assets and liabilities

(272,813)

27,886

(95,060)

87,850

Drilling and completion costs incurred

(201,158)

(156,103)

(830,195)

(566,058)

Land and leasehold costs incurred

(16,890)

(19,738)

(95,947)

(57,714)

Capitalized interest incurred

(11,374)

(10,961)

(43,893)

(48,458)

Financing commodity derivative settlements

(133,889)

—

(431,800)

(11,188)

Other operating expenses (benefits)

(59)

7,219

(6,760)

7,219

Other

184

306

2,236

2,662

Adjusted Free Cash Flow (Non-GAAP)^(a)(b)(c)

$    105,642

$      53,786

$    540,593

$    174,950

^(a)

See footnote (a) on the Reconciliations of Adjusted Net Income (Loss) for a discussion of our uses of non-GAAP measures.

^(b)

Adjusted Free Cash Flow is an indicator of a company's ability to generate funding to maintain or expand its asset base, make distributions and repurchase or extinguish debt.  Ascent defines "Adjusted Free Cash Flow" as net cash provided by operating activities adjusted for changes in operating assets and liabilities; drilling and completion costs incurred; land and leasehold costs incurred; capitalized interest incurred; financing commodity derivative settlements; and certain other operating expenses including changes in legal reserves, including settlements and other items which affect the comparability of results or that are not indicative of trends in the ongoing business.  Adjusted Free Cash Flow is a supplemental measure of liquidity monitored by management that is not defined under GAAP and that does not represent, and should not be considered as, an alternative to net cash provided by operating activities, as determined by GAAP.

^(c)

Adjusted Free Cash Flow does not include the cash impact associated with the Long Term Incentive Cash Award of $5.5 million and $16.9 million for the three months and year ended December 31, 2022, respectively.  It is reflected in our consolidated financial statements as a non-cash equity contribution received from our Parent as the Plan was established by our Parent, Ascent Resources, LLC.

ASCENT RESOURCES UTICA HOLDINGS, LLC
ROLL-FORWARD OF PROVED RESERVES
(Unaudited)

Year Ended

December 31,

(in mmcfe)

2022

Proved Reserves at December 31, 2021

9,240,487

Extensions, discoveries and other additions

656,094

Revisions

Purchases of reserves

220,206

Production

(771,119)

Proved Reserves at December 31, 2022

8,870,883

Proved developed reserves

5,580,079

Proved developed reserves percentage

63 %

Standardized Measure of Discounted Future Net Cash Flows ($ in thousands)(GAAP)

$ 19,039,699

Add: Present value of future income taxes discounted at 10% per annum^(a)

PV-10 ($ in thousands) (Non-GAAP)^(a)

$ 19,039,699

^(a)

Reserve volumes and PV-10 were estimated using SEC reserve recognition standards and pricing assumptions based on the unweighted arithmetic average of the prices on the first day of each month within the 12-month period ended  December 31, 2022.  The average adjusted prices used in Ascent's reserve reports were $6.26 per mcf of natural gas, $87.39 per bbl of oil and $39.13 per bbl of NGL utilizing a benchmark of $6.36 per mmbtu of natural gas and $94.14 per bbl of oil and condensate. PV-10 is a non-GAAP measure that typically differs from the standardized measure, because the former does not include the effects of estimated future income tax expense.  However, because Ascent is a disregarded entity for income tax purposes, it has estimated no future income tax expense and the two measures are the same as of December 31, 2022, as calculated in the reconciliation above.  PV-10 can be used within the industry and by creditors and securities analysts to evaluate estimated net cash flows from proved reserves on a more comparable basis.