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Resolute Energy Corporation (REN)
Q3 2012 Earnings Call
November 5, 2012, 5:00 p.m. ET
Michael N. Stefanoudakis – SVP, General Counsel, Secretary
Nicholas J. Sutton – Chairman, CEO
Theodore Gazulis – EVP, CFO
Don Freeman – Raymond James
Noel Parks – Ladenburg Thalmann & Co.
Richard Tullis – Capital One Southcoast, Inc.
Ronald Mills, Johnson Rice & Co.
Brian Ottman – Suntrust
Jason Wangler – Wunderlich Securities, Inc.
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Thank you. Michael Stefanoudakis, General Counsel, you may begin your conference.
Michael Stefanoudakis - SVP, General Counsel, Secretary
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.
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 and welcome to Resolute’s third quarter 2012 earnings conference call. As we have done in previous calls, I will provide you with a brief overview of the Company and then an operations update. After that, Ted Gazulis, Resolutes Chief Financial Officer, will review our financial results, we then will take your questions.
I intend to keep my comments brief because I believe we covered most key points in our press release that crossed before the markets opened this morning.
First of all, I’m pleased to report that our third quarter production was 9,365 BOE per day, representing an 18% increase over the same quarter last year, and I remain confident that we will meet our year-over-year production growth guidance of 15% for the full year.
Our increased production came from all areas except for Hilight Fields, as Aneth Field contributed to approximately 44,000 equivalent barrels of additional production. Our Bakken activities contributed an additional 66,000 BOE, and the Permian contributed an additional 29,000 BOE.
Some quick math shows that 68% of the production growth in the third quarter came from our relatively newer assets in the Permian and the Bakken, while we still see continued growth from our legacy Aneth Field.
Our focus on production was accompanied by an equally aggressive effort to drive down well cost, and to enhance operational efficiencies; the details of which I will discuss in a moment.
As one final summary point, we ended the third quarter with a strong balance sheet and ample liquidity for funding our growth plans, and that includes acquisitions.
Drilling a little deeper, let’s turn to our foundation asset, Aneth Field, which is the source of the majority of our oil production and which generates free cash flow for reinvesting in our projects in the Permian and Williston Basin.
The third quarter, our Aneth Field properties produced 6,399 BOE per day, up 8% from the same quarter last year. As compared to the second quarter of this year, Aneth Field production is down by about 250 BOE per day, but keep in mind that we sold production and reserves to Navajo Nation Oil and Gas during the third quarter.
Our year-over-year production increased in Aneth had many contributing factors, including on-going responds from Phases 1, 2, and 3 of our CO2 expansion project. Initial response from Phase 4, contribution from our DC IIC program, drilling new wells and sidetracking existing wells, and increasing run times and efficiencies from our Aneth central compression facility, and other field equipment upgrades.
Production from Phases 1, 2 and 3 of our CO2 expansion in the Aneth unit, continues to improve with a 15% increase over the third quarter of 2011 and an uptick of 5.5% over the second quarter of this year.
Phase 4 surface upgrades consisting mainly of upgrades to pipelines, the main battery and production headers are virtually complete. Phase 4 has CO2 related production and two wells close to Phase 3 injection. The one [inaudible] producing well in Phase 4 has seen CO2 breakthrough. This bodes well for further increases in production at Phase 4.
In our DC IIC project, we completed two additional producing wells that have each averaged 100 gross barrels a day of incremental production. We are on track to having 21 producers and 26 injectors online by year end.
Recall that our recompletion efforts in the DC IIC formation began two years ago. There are 18 wells that have been producing for one to two years, and these wells are still averaging 43 barrels per day of incremental production.