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Energen Corporation's CEO Discusses Q1 2012 Results - Earnings Call Transcript

To better reflect the gross reserve potential of the 3rd Bone Spring wells to be drilled in this core area, east of the Pecos River over the next several years we have adjusted estimated average ultimate recovery to 475,000 BOE per well and we estimate the product mix to be 66% oil, 18% liquids and 16% dry gas.

We’d released a post-plant type curve and cumulative production curve for our 3rd Bone Spring wells scheduled to be drilled in 2012 through '14. You can see these curves on our website. The key takeaway, I believe, is about $100 oil and $4 of natural gas. We estimate these wells will generate an outstanding return of 72% before-tax rate.

We are adding four wells to our 3rd Bone Spring drilling schedule in 2012, four net wells. This brings the total number of wells to be drilled this year to be 47 gross or 43 net. In the first quarter we drilled 11 gross wells. Our rig count will continue at five to seven in Delaware Basin this year.

We also have lowered our target drilling complete costs for the 3rd Bone Spring wells for the remainder of 2012 to $6.9 million. We expect cost savings for the remainder of the year to come from continued stimulation optimization and a water recycling program.

On the east side of the Pecos River, we have approximately 30,000 net acres of which 17,300 undeveloped. Based on the likelihood of 160-acre spacing there we estimate that there are 92 potential locations remaining to be drilled.

Turning next to the Midland Basin, we have a play that is in full development generating solid results that meet our expectations. We plan to drill 177 gross or 170 net vertical Wolfberry wells this year. During the first quarter, we drilled 33 gross wells, 33 net and we plan to keep seven to eight rigs busy in the Midland Basin this year.

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