Resolute Energy Corporation (REN)

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Resolute Energy Corporation (REN)

Q4 2013 Results Conference Call

March 10, 2014 4:30 PM ET


Jim Piccone – President

Nick Sutton – Chairman and CEO

Ted Gazulis – CFO


Jason Wangler – Wunderlich Securities, Inc

John Freeman – Raymond James & Associates

Ron Mills – Johnson Rice

Noel Parks – Ladenburg Thalmann & Company Inc.

Richard Tullis – Capital One Southcoast, Inc.

Ryan Oatman – SunTrust Robinson Humphrey

Jeff Grampp – Northland Capital Markets



Good afternoon, and welcome to the Resolute Energy Corporation year-end and fourth quarter 2013 conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Jim Piccone, President. Please go ahead.

Jim Piccone

Good afternoon, everyone. My name is Jim Piccone and I am the President and former General Counsel of Resolute. I'd like to read the forward-looking statement before turning the call over to Nick Sutton, our Chairman and CEO.

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.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this investor conference call. A listing of the material risk factors faced by Resolute appears in our Form 10-K and is updated periodically in the Form 10-Qs and other public filings. At this time, I'd like to turn the call over to Nick Sutton, our Chairman and CEO. Nick?

Nick Sutton

Thank you, Jim. Good afternoon, and welcome to Resolute's fourth-quarter and year-end 2013 earnings conference call. I will assume that you have had an opportunity to read our press release [across] [ph] earlier this morning. So I will focus my comments on the primary drivers of our performance during last quarter and last year. Ted Gazulis will give you an overview of our financial performance and guidance, and then I will put some color on our direction going forward to 2014 before opening the call for Q&A.

There are three major themes driving our value creation here at Resolute. The first is our complete transition to horizontal drilling. The second is our continuing focus on oil prone activities, and the third is our ability to allocate capital across an attractive portfolio of crude oil assets.

Combined, these three factors create a foundation for strong cash flow generation, multi-year visible growth potential, and exciting upside. First, let's talk about production during the fourth quarter. Production averaged 12,709 Boe per day, a 10% sequential improvement from third quarter. Production was 26% higher than the same quarter last year.

For the full year, production averaged 12,239 Boe per day, 31% higher than last year. Substantially all of the production growth came from the Permian Basin, offset by small declines at Aneth, and the loss of almost 300 Boe per day from the sale of our New Home assets in the Bakken. Increasing our asset base in the Permian Basin, and increasing production volumes from our horizontal drilling program there, drove fourth-quarter production volumes from the Permian to a level that was 26% higher on a sequential basis, and 2013 Permian production was nearly 600% higher than last year.

During the fourth quarter, we finished our vertical well program on our Gardendale acreage in the Permian Basin, and now all of our new operated wells are being drilled as horizontals. In the Midland Basin portion of the Permian, our first three horizontal wells were drilled to the Wolfcamp B interval on our Gardendale acreage. In December, we announced preliminary results from the first two of those horizontal wells in the Permian Basin and also from our first well in the Powder River Basin.

The third Permian Basin horizontal, the Munn-Clark 2617H, was drilled to a lateral length of 4,550 feet, completed with 15 frac stages, and it came on with an additional 24-hour IP rate of 600 Boe per day. At the time, we thought that was pretty good. But Munn-Clark went on to produce at a peak rate of 877 Boe per day, and then settled into a 30-day average daily rate of 465 Boe; 94% of its production is crude oil.

Our other Gardendale wells are performing in a similar manner which helped increase Permian production in 2013 to an average of 3,950 Boe per day, a nearly six-fold increase over the previous year. And we estimate that EUR at the Gardendale acreage in the range of 350,000 to 400,000 Boe per well. Internal rates of return in those wells are expected to range between 25% and 45%. You can see the Gardendale horizontal wells are attractive investments.

After finishing the three wells in Gardendale, we moved the rig to Reeves County in the Delaware side of the Permian Basin. There we have spud three horizontal wells. One is in production, one is waiting on completion, and one is nearing TD.

Our primary current objective on our Delaware Basin acreage is to horizontally tap the Wolfcamp A and the Wolfcamp B intervals. The first of the wells, the LH Meeker, continues to flow and had a 24-hour peak IP of 1,403 Boe per day, and an initial 30-day IP that averaged 1,074 Boe per day based on three-stream method of calculation. Productions from the Wolfcamp A interval is approximately 48% crude oil.

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