ProductionAs shown in the table below, production in the third quarter of 2012 was 9.0 Bcfe, or 98.1 MMcfe per day, a 24 percent decrease compared to 11.9 Bcfe, or 129.9 MMcfe per day, in the prior year quarter. Excluding production from the Appalachian assets sold in July 2012 and the Arkoma Basin assets sold in August 2011, production in the third quarter of 2012 was 8.3 Bcfe, or 90.5 MMcfe per day, and the production in the prior year quarter was 9.2 Bcfe, or 100.0 MMcfe per day. The 0.9 Bcfe, or nine percent, decrease in pro forma production was the result of a 1.6 Bcfe, or 31 percent, decrease in natural gas production due to reduced natural gas drilling since mid-2010, partially offset by a 127 MBO (0.8 Bcfe), or 20 percent, increase in oil and NGL production due primarily to drilling in the Eagle Ford Shale since early 2011. As a percentage of total equivalent production, oil and NGL volumes were 52 percent in the third quarter of 2012 compared to 33 percent in the prior year quarter. Oil production increased 34 percent from 427 MBO in the prior year quarter to 573 MBO in the third quarter of 2012.
|Total and Daily Equivalent Production for the Three Months Ended|
|Sept. 30,||Sept. 30,||June 30,||Sept. 30,||Sept. 30,||June 30,|
|Region / Play Type||2012||2011||2012||2012||2011||2012|
|(in Bcfe)||(in MMcfe per day)|
|Eagle Ford Shale||3.5||2.1||3.6||37.9||22.4||39.3|
|Pro Forma Totals (3)||8.3||9.2||8.7||90.5||100.0||95.4|
|(1)||Includes production from the Appalachian assets sold in July 2012|
|(2)||Includes production from the Arkoma Basin assets sold in August 2011|
|(3)||Pro forma to exclude production from divested Appalachian and Arkoma Basin assets|
|Note - Numbers may not add due to rounding|
- Lease operating expenses decreased by $2.3 million, or 27 percent, to $6.2 million, or $0.69 per Mcfe produced, from $8.5 million, or $0.71 per Mcfe produced, due primarily to lower repair and maintenance, compression and water disposal expenses, as well as reduced expenses attributable to the sale of our Appalachian properties in July 2012 and our Arkoma Basin properties in August 2011. These cost decreases were partially offset by higher chemical treatment and environmental compliance costs attributable to our expanded oil drilling program.
- Gathering, processing and transportation expenses increased by approximately $0.1 million, or six percent, to $3.1 million, or $0.35 per Mcfe produced, from $3.0 million, or $0.25 per Mcfe produced, due primarily to higher processing costs associated with NGLs in the 2012 period.
- Production and ad valorem taxes increased $1.2 million, or 35 percent, to $4.6 million, or 6.1 percent of total product revenues, from $3.4 million, or 4.1 percent of total product revenues, because we reported a property tax recovery of $1.2 million attributable to wells in West Virginia during the 2011 period.
- General and administrative (G&A) expense, excluding share-based compensation, decreased by approximately $0.4 million, or four percent, to $10.4 million, or $1.15 per Mcfe produced, from $10.8 million, or $0.91 per Mcfe produced. Excluding restructuring costs in the third quarters of both 2012 and 2011 related to the Appalachian and Arkoma asset sales, G&A expense, excluding share-based compensation, decreased by approximately $0.4 million, or four percent, to $8.9 million, or $0.99 per Mcfe produced, from $9.3 million, or $0.78 per Mcfe produced. This decrease was due primarily to lower employee headcount and lower support costs following restructuring actions taken during 2011 and 2012, with the unit cost increasing due to lower gas equivalent production volumes.