PVAC Penn Virginia Corp

Management Discussion

• We are an independent oil and gas company engaged in the onshore exploration, development and production of crude oil, natural gas liquids, or NGLs, and natural gas. Our current operations consist primarily of drilling unconventional horizontal development wells and operating our producing wells in the Eagle Ford Shale, or the Eagle Ford, in Gonzales, Lavaca, Fayette and DeWitt Counties in South Texas.
• Crude oil prices increased moderately throughout the first half of 2019, rising from levels in the upper $40 per barrel range at the beginning of the year and into the lower $60 per barrel range in April and May before falling back to the upper $50 per barrel range by the end of June 2019 due primarily to domestic and global supply and demand dynamics. While impacting us to a lesser extent, NGL and natural gas pricing has steadily declined from year-end 2018 levels due primarily to excess domestic supply.
• Since February 2019, we have contracted for our drilling rigs on a pad-to-pad basis and the day rates charged for these services have remained relatively unchanged through the first half of 2019 while related casing costs have declined. While we have a minimum utilization commitment for dedicated frac services, certain component stimulation product and service costs have also declined in the first half of 2019. For the balance of the year, we anticipate that both drilling day rate and stimulation costs will decline. Costs incurred for most oilfield products and services associated with operating our properties remained relatively stable during the first half of 2019 and are anticipated to remain as such for the second half of 2019 with moderate declines in certain costs consistent with recent industry experience.