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Energen Updates 2013 Outlook

Stocks in this article: EGN

Energen Corporation (NYSE: EGN) affirmed today that its 2013 consolidated capital budget of $975 million will focus primarily on the exploration and development of its liquids-rich assets in the Permian Basin of west Texas.

Energen’s oil and gas exploration and production subsidiary, Energen Resources Corporation, plans to invest approximately $900 million in 2013, including some $745 million to continue developing the company’s vertical Wolfberry play in the Midland Basin, the horizontal 3 rd Bone Spring sand in the Delaware Basin, and its conventional and waterflood properties in the Central Basin Platform.

Another $130 million will be deployed largely to test the horizontal Wolfcamp and/or Cline potential in the Midland Basin and the horizontal Wolfcamp potential in the Delaware Basin. Energen Resources also expects to drill several wells in the Delaware Basin to test the vertical Wolfbone play.

In response to continued low natural gas prices, Energen does not plan to invest drilling capital in any of its dry gas basins. The company will, however, invest approximately $25 million largely for pay-adds and facilities in the San Juan Basin. Energen's utility operations will invest approximately $75 million in 2013 for normal system needs.

Production Guidance Revised

Energen Resources expects current infrastructure-related issues in the Permian Basin to negatively affect production in the fourth quarter of 2012 and potentially impact production in the first half of 2013, as well. Greater-than-expected ethane rejection, higher-than-anticipated line pressures, and completion delays are having a negative impact on production in the Midland Basin, while oil inventories at the well-head primarily in the Delaware Basin are growing in response to transportation infrastructure issues.

As a result, Energen has lowered its estimated 2012 and 2013 production by 400,000 barrels of oil equivalents (BOE) in each period to 24.1 million and 26.1 million BOE, respectively. Total oil and natural gas liquids (NGL) production in 2013 is estimated to increase a solid 23 percent and comprise more than half of total production.

2013 Capital, Drilling, and Production Summary

   

2013e Capital

   

2013e Wells

   

2013e

   

Production

($MM)

Gross (Net) Rig Count 2013e  

2012e

Midland Basin

$

465

185

 

(173)

10-11

5.6

3.6

Wolfberry

$

420

179

(167)

9-10

 

 

Wolfcamp/Cline

$

45

6

(6)

1

 
Delaware Basin $ 325

44

(38)

6

4.6

2.9

3 rd Bone Spring

$

240

32

(28)

4

 

 

Wolfcamp/Wolfbone

$

85

12

(10)

2

 
Other Permian* $ 85

110

(88)

1-2 4.5 4.9

San Juan Basin/Other

   

$

25

   

 

 

0

   

0

   

11.4

 

12.7

TOTAL

   

$

900

   

339

 

(299)

   

17-19

   

26.1

 

24.1

* Includes 5 gross (4 net) injector wells

 

Production (MMBOE)

Commodity         2013e         2012e         Change
Oil 10.6 8.8 20 %
NGL 3.4 2.6 31 %
Natural Gas         12.1         12.7         (5) %
Total         26.1         24.1         8 %
 

2013 Financial Guidance

Energen’s guidance range for 2013 consolidated after-tax cash flows is now $917-$946 million. Energen Resources’ after-tax cash flows are estimated to be $822-$851 million, and Alagasco’s utility operations are expected to generate after-tax cash flows of approximately $95 million. Net income in 2013 is estimated to be $219-$248 million, or $3.03-$3.43 per diluted share, and includes $22.2 million, or 31 cents per diluted share, of potential dry hole expense. Guidance does not include non-cash, mark-to-market gains or losses. [See “Non-GAAP Financial Measures” for more information and reconciliation.]

Energen Resources’ estimated exploration and production expenses per BOE in 2013 are:

Lease Operating expense    
Base, marketing, and transportation $ 10.25
Production taxes $ 2.48
DD&A expense $ 18.46
General & Administrative expense, net $ 3.57
Interest expense $ 2.27
 

Approximately 70 percent of the company’s total estimated production in 2013 is hedged, including 84 percent of estimated oil production, 31 percent of estimated NGL production, and 69 percent of estimated natural gas. Assumed prices applicable to Energen Resources unhedged volumes are $90.00 per barrel of oil, $0.89 per gallon of NGL, and $3.50 per Mcf of natural gas.

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