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Energen Reports First Quarter 2012 Operating And Financial Results

Energen Corporation (NYSE: EGN) announced today that a 40 percent increase in oil and natural gas liquids (NGL) production and a 12 percent higher realized oil price were major contributors to the energy company’s first quarter 2012 net income of $57.4 million, or 79 cents per diluted share. Excluding non-cash items, adjusted net income (a non-GAAP measure) totaled $96.1 million, or $1.33 per diluted share. See “Non-GAAP Financial Measures” for explanation and reconciliation. Non-cash items in the quarter were mark-to-market losses on certain financial commodity contracts of $40.7 million ($25.3 million after tax, or 35 cents per diluted share) and a commodity price-related write-down of natural gas properties in East Texas of $21.5 million (13.4 million after tax, or 19 cents per diluted share). Prior-year results totaled $94.3 million, or $1.30 per diluted share.

Consolidated adjusted EBITDA (a non-GAAP measure) totaled $262.8 million and compared with $222.1 million in the prior-year first quarter. Energen’s oil and gas exploration and production company, Energen Resources Corporation, had adjusted EBITDA of $173.3 million in the first quarter of 2012 and $136.9 million in the same period a year ago. See “Non-GAAP Financial Measures” for explanations and reconciliation.

3 rd Bone Spring Results Continue to Exceed Expectations

Energen Resources’ 3 rd Bone Spring program continued to generate improved well performance in 2012, particularly now that the company has focused its operations on its core acreage east of the Pecos River in Ward, Winkler, and Loving counties in west Texas. The company’s 3 rd Bone Spring drilling programs in 2012 and 2013 will be concentrated in this core area.

Energen Resources also is adding 4 net wells to its 2012 drilling schedule; this brings the total number of wells to be drilled in the horizontal 3 rd Bone Spring play in the Delaware Basin to 47 gross (43 net) wells. During the first quarter, Energen Resources drilled 11 gross (10 net) wells. The company plans to continue running 5-7 rigs in the Delaware Basin in 2012.

Energen tested 7 gross (6.5 net) 3 rd Bone Spring wells in the first three months of 2012. The initial stabilized rates of the wells ranged from 514 barrel of oil equivalents per day (61% oil) to 1,737 BOE per day (76% oil), with an average of 1,004 BOE/day (73% oil). At 1,737 BOE/day, this Ward County well has become the company’s top initial performer; the well was tested on a 16/64” choke at a pressure of 4,400 PSI. Initial stabilized rates reflect consistent flow rates after clean-up of stimulation fluid. The five first quarter wells with sufficient production history had a 30-day average (gross) production rate of 783 BOE/day (72% oil).

To better reflect the gross reserve potential of 3 rd Bone Spring wells to be drilled in this core area east of the Pecos River over the next several years, Energen has adjusted the estimated ultimate recovery (EUR) to an average 475,000 BOE per well; the company’s net revenue interest is 75 percent. The estimated product mix is 66 percent oil, 18 percent NGL, and 16 percent dry gas.

At $100 per barrel of oil and $4 per Mcf of natural gas, Energen estimates that its 3 rd Bone Spring program over the next several years will generate a 72 percent before-tax rate of return. A post-plant type curve and cumulative production curve for the wells currently scheduled to be drilled in 2012-14 is available on the company’s Website:

Additionally, the company expects to realize cost savings for the remainder of 2012 associated with continued stimulation optimization and a water recycling program. The company’s targeted cost to drill and complete a well in the 3 rd Bone Spring play for the remainder of 2012 is $6.9 million. This drill and complete cost reflects 4,400-foot lateral lengths and 10-11 frac stages.

Energen Resources has approximately 85,000 net acres in the Delaware Basin thought to be prospective for the 3 rd Bone Spring sand; 70,500 of those acres remain undeveloped. On the east side of the Pecos River, the company’s net acreage position is 33,000, with 17,300 undeveloped. Based on the high likelihood of 160-acre spacing, Energen Resources estimates that it has 92 potential locations remaining to be drilled.

Vertical Wolfberry Wells in Midland Basin Performing to Expectations

Energen Resources’ vertical Wolfberry program in the Midland Basin continues to perform to expectations. In 2012, the company plans to drill 177 gross (170 net) wells in this developmental play as it closely monitors the potential for horizontal Wolfcamp and Cline on its acreage position. During the first quarter, Energen Resources drilled 33 gross (32 net) wells. The company plans to continue running 7-8 rigs in the Midland Basin in 2012.

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