Resolute Energy (REN)
Q1 2013 Earnings Call
May 06, 2013 4:30 pm ET
Michael N. Stefanoudakis - Senior Vice President, General Counsel and Secretary
Nicholas J. Sutton - Chairman and Chief Executive Officer
Theodore Gazulis - Chief Financial Officer and Executive Vice President
Jeffrey W. Robertson - Barclays Capital, Research Division
Ronald E. Mills - Johnson Rice & Company, L.L.C., Research Division
Jason A. Wangler - Wunderlich Securities Inc., Research Division
Ryan Oatman - SunTrust Robinson Humphrey, Inc., Research Division
Noel A. Parks - Ladenburg Thalmann & Co. Inc., Research Division
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Michael N. Stefanoudakis
Good afternoon, everyone. My name is Michael Stefanoudakis. As the operator mentioned, I'm the Senior Vice President and General Counsel of Resolute. And before beginning the conference call, I'd like to read the forward-looking statement.
This investor conference call includes forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as expect, estimate, project, budget, forecast, anticipate, intend, plan, may, will, could, should, poised, believes, predicts, potential, continue and similar expressions are intended to identify such forward-looking statements.
Forward-looking statements in this conference call include matters that involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from results expressed or implied by this investor conference call. Please refer to our SEC documents for a full listing of risk factors. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this call.
At this time, I'd like to turn the call over to Nick Sutton, our Chairman and CEO.
Nicholas J. Sutton
Thank you, Michael. Good afternoon, everyone. Thank you for being on the call with us today. This morning, we issued a comprehensive press release covering the first quarter of this year. As a result, I don't intend to get into a lot of detail on this call. Rather, I will simply cover some highlights and then turn the call over to Ted Gazulis for a financial review.
During the first quarter, average net production was 11,633 BOE per day. That's 39% higher than the same quarter last year. As you know, towards the end of the quarter, we acquired the remaining 68% working interest in and operatorship of our Gardendale project area in the Midland Basin. On a pro forma basis, that would add an additional 1,923 BOE per day of first quarter production, resulting in pro forma net production of 13,556 BOE per day, or 62% higher than the same quarter last year.
As might be expected, January and February were difficult months weather-wise. Nonetheless, our oil production was in line with our expectations. Gas production was somewhat below expectation, primarily because of the pipeline issue in the Aneth Field that was described in our release. I'd point out, however, that 92% of our revenues were oil-related. So the impact of the reduction in gas production was somewhat de minimis in the big picture, and at any rate, we expect that to be a temporary situation.
Aneth Field production continues to increase. A quick read of our net Aneth Field production numbers would show an immaterial 1% increase over the net production in the prior year quarter, but we must keep in mind the divestiture of a portion of our interests to Navajo Nation Oil and Gas Company in early January.
On a gross basis, Aneth Field oil production increased by about 8%, showing success in our ongoing CO2 flood project, our focus on compressor run times and various field activities undertaken to further enhance production.
As a result of our drilling program on our acquisitions in the Permian Basin, production from that area increased over 800% from the prior year period, and production from there amounted to 27% of our quarterly production on a BOE basis, reducing Aneth's contribution to 52%. Of course, the Permian percentage will increase when we can fully reflect the March Gardendale acquisition in our financials.
Production from our other areas, Hilight Field and the Powder River Basin, and Bakken production in North Dakota, accounted for only about 21% of our production, 13% and 8%, respectively. Bakken production was slightly below our expectation, as the fields on numerous wells go down primarily due to weather conditions. Alcon operates those properties, so we expect them to address the situation with vigor. On the other hand, our Wyoming properties performed above expectation.
So all in all, we were pleased with production, particularly in the most difficult time of year, operationally speaking. Let me again emphasize that our oil production, which dominates our revenue stream, was on target. We previously guided to a full year production increase of 50% over last year. We are reaffirming our 2013 full-year target of 13,000 to 15,000 BOE per day.
On the negative side, we were not immune from certain issues described by many, many other operators over recent weeks, notably the temporary but impactful widening in the Permian Basin differential and NGL prices that were weaker than the historic norm. Fortunately, the basis issue has corrected itself, but we do expect NGL prices to languish for a while.
Our increase in unit lease operating expense could raise an eyebrow, but I would like to explain. Virtually the entirety of the increased LOE was in Aneth Field. There, our field managers use their professional judgment to allocate crews and equipment to field activities. Some of these field activities are maintenance, and therefore expensed as an LOE, and some are capital in nature and therefore go against the capital budget.