At this time I will turn the call over to Energen’s Chairman and Chief Executive Officer, James McManus. James?James McManus Thanks Julie and good morning to you all. 2011 was an important year for Energen Corporation. It was the first year in which we could expect to see meaningful results of our strategic shift away from gas to oil and natural gas liquids. And we did see meaningful results in 2011. Energen Resources produced a record 20.45 million BOE in 2011. 42% of the 2011 production was oil liquids, up from 37% in 2010. In 2010 the Permian Basin contributed 30% of total production. Today 38% of our production comes from the Permian Basin. Year end credit reserves totaled a record $343 million BOE. Our product mix changed dramatically in 2011. At the end of 2010 47% of our crude reserves were oil or liquids. A year later our crude reserve mix is now 54% oil or liquids. For years the San Juan Basin has been home to the majority of Energen’s prude reserves and that too changed in 2011 as we began to realize the impact of the strategic shift we made in 2009 to oil and liquids. At year-end 2011, 64% of our crude reserves are in the Permian Basin. After Permian Basin reserves increased 38% by year-end to $183.6 million BOE. The invested record drilling capital of $810 million in 2011, approximately 85% of those dollars went into the Permian Basin. And we required some $300 million of addenda prude and un-prude leasehold in the Permian Basin in 2011. Based on our operating results we achieved in 2001, Energen is now well positioned to continue realizing the benefits of our shift and focus to oil liquids. We’re very pleased with the progress we’ve been a making in developing the vertical Wolfberry Basin. In 2011 we drilled 153 net Wolfberry wells and completed 100 of them. We also completed 22 wells that were started in 2010; in other words we brought 122 wells online in 2011 and we currently have 53 net wells in various stages of conclusion and hook up.
Initial stabilized rates of the 39 wells brought online during Q4 and 65 barrels of oil per day and 150 mcf per day of wet gas. To remind you Energen’s risk model initialized stabilized rate was 55 barrels per day and 110 mcf per day of wet gas. So obviously we continue to outperform our model.We have approximately 32,000 net undeveloped acres in the Wolfberry Play offering some 800potential drilling locations based on 40 acre spacing. Our estimated cost of drilling complete on Wolfberry Well in 2012 is $2.3 million. This is slightly higher than previously estimated due to cost pressure of higher oil prices. Back when we did the negotiating, if you remember, oil prices had dropped down to 80 but then they very quickly rapidly moved back up into the 100 range. We continue to see positive results on our third base spring wells, the wells we had drilled on the east side of the Pecos River are performing better then are the majority of wells drilled this year on the left side of the river. There’s less infrastructure over there and we encountered higher amounts of water. In general nine of the twelve wells drilled on the left side of the Pecos River have experienced steeper than expected declines and our efforts to maximize their production have been somewhat hampered by limited infrastructure. Later in the year however we drilled three water disposal wells and recently installed pumps on three of our West Side Bone Spring wells as we continue to try to work to improve that production. However, taking collectively our 3 rd Bone Spring program is generating very good results. We drilled and concluded 18 net 3 rd Bone Spring wells in 2011 and concluded two additional wells that were started in 2010, another five wells are drilling or waiting on completion or testing. The initial stabilized rate of the 20 net wells brought online in 2011 averaged approximately 400 barrels of oil per day and 1035 mcf per day of wet gas. This exceeds our risk weighted average model rate of 260 barrels per day and 735 mcf per day of wet gas.
We brought seven wells online during Q4 of 2011; two on the west side, five on the east side. These wells had an initial stabilized weight of approximately 485 barrels per day and 1085 mcf per day of wet gas, again outperforming the model substantially.Read the rest of this transcript for free on seekingalpha.com