Resolute Energy Corporation (REN)

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Resolute Energy Corporation (REN)

Q1 2014 Earnings Conference Call

May 13, 2014 4:30 pm ET

Executives

Michael N. Stefanoudakis - SVP, General Counsel and Secretary

Nicholas J. Sutton - Chairman and CEO

Theodore Gazulis - EVP and CFO

Analysts

Ronald Mills - Johnson Rice

Jason Wangler - Wunderlich Securities

Richard Tullis - Capital One

Noel Parks - Ladenburg Thalmann

Jeff Grampp - Northland Capital Markets

Ryan Oatman - SunTrust Robinson Humphrey

Patrick Lee - Wells Fargo

Presentation

Operator

Good afternoon, and welcome to the Resolute Energy Corporation First Quarter 2014 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions) Please also note this event is being recorded. I would now like to turn the conference call over to Michael Stefanoudakis, Senior Vice President and General Counsel. Please go ahead.

Michael N. Stefanoudakis

Good afternoon, everyone. My name is Michael Stefanoudakis. I'm the Senior Vice President and 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 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?

Nicholas J. Sutton

Thank you, Michael. Good afternoon and welcome to Resolute's first quarter 2014 earnings conference call. I will assume that you had an opportunity to read our press release, out yesterday after the market close. So I will focus my comments on three specific themes, then Ted Gazulis will give you an overview of our financial performance, and after that we will open the call for Q&A.

The three themes that I wish to address are asset quality, visible growth potential and capital. First, let's talk about the encouraging results we're seeing from our horizontal drilling and what those results portend for the quality of our assets in both the Permian and Powder River basins.

Starting in the Permian, with the drilling of the Harrison State well, we completed our initial three-well program in Reeves County. Our first Delaware Basin horizontal well, the LH Meeker C21 1501H, recorded a peak 24-hour production rate of 1,403 BOE per day and a peak 30 day rate of 1,074 BOE per day. This Wolfcamp A test continues to show strong production, averaging over 970 BOE per day over its first 100 days of production. We believe that these strong numbers are indicative of what we might expect to see across our Delaware Basin leasehold.

Our second well, the James 02 1401H, experienced downhole issues during completion and on a sidetracked, so we elected to stop drilling and take steps to complete a 2,000 foot portion of the lateral. The James frac should take place in June. Our third well, the Harrison State C20 1401H, was drilled to TD in the first quarter and is awaiting completion, currently scheduled to take place in a couple of weeks.

As we execute our base capital plan, we will maintain our focus on the Delaware Basin side of the Permian. A near-term catalyst for the program will be the first of four 7,500 foot laterals on our Mustang block. The Renegade 03 02BH will be a Wolfcamp B test and is currently drilling in the vertical section of the wellbore. We anticipate reaching total depth by late May. As these wells are completed, they will help drive oil production higher in the second quarter and for the full year.

Despite the drilling issue with the James well, we are confident of the very strong returns embedded in our Permian assets. The Meeker well, though speaking for itself on a daily basis, the data that we gathered while drilling the James and Harrison wells and the ongoing success of operators in our neighborhood, all point to the return potential of this exciting area. We estimate we have 210 horizontal drilling locations and 135 lower risk recompletion opportunities on our total Permian Basin leasehold that provide Resolute with a visible growth path for many years to come in this oil prone region.

Moving to the Powder River Basin, total production during the first quarter of this year increased 17% over the same quarter last year. The increase in production was largely due to the Castle 3-21TH, our first horizontal Turner well which we turned on to production at the end of last year. Now this is a good segue into talking about this emerging play. The more we learn about the Turner formation, the more we like what we see. Although it is still early days, it may be that the horizontal Turner play has a potential to create another Resolute within Resolute.

The industry continues to report results that supplement our Castle well data-point. For example, EOG recently announced the results from two Turner wells as having an average IP of 716 barrels of oil per day. In a recent investor presentation, EOG disclosed they expect horizontal Turner wells to produce estimated EURs that average 860,000 BOE, assuming an 8,200 foot lateral section.

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