Penn Virginia Sees 12% Increase in 2Q Production



Penn Virginia provided an update of its oil and gas operations, including second quarter 2011 results.

Highlights

Operational results for the second quarter of 2011 and other operational highlights included the following:

  • Quarterly production of 11.7 billion cubic feet of natural gas equivalent (Bcfe), or 128.6 million cubic feet of natural gas equivalent (MMcfe) per day, a 12 percent increase as compared to 10.5 Bcfe, or 115.1 MMcfe per day in the second quarter of 2010
  • Quarterly oil and natural gas liquid (NGL) production increased to 472 thousand barrels, or 24 percent of total equivalent production, from 224 thousand barrels, or 13 percent of total equivalent production, in the second quarter of 2010
  • Completed and brought on line nine (7.5 net) Eagle Ford Shale wells, for a total of 12 (10.0 net) Eagle Ford Shale wells to date, with an average peak gross production rate of 1,105 barrels of oil equivalent per day (BOEPD)
  • To date, six wells have had a 30-day average gross production rate of 693 BOEPD
  • Current production of approximately 8,000 (5,000 net) BOEPD
  • Three rigs currently drilling the 15th through 17th Eagle Ford Shale wells, with two wells waiting on completion
  • Added approximately 1,200 net acres to the Eagle Ford Shale play in July 2011, bringing total net acreage to approximately 17,800 (13,900 net) acres in Gonzales County, TX with up to 142 identified well locations
  • Third-party pipeline construction is complete, with natural gas gathering and processing in place

Production

Production in the second quarter of 2011 was approximately 11.7 Bcfe, or 128.6 MMcfe per day, a 12 percent increase as compared to 10.5 Bcfe, or 115.1 MMcfe per day, in the prior year quarter and a five percent decrease from 12.2 Bcfe, or 135.2 MMcfe per day, in the first quarter of 2011. As a percentage of total equivalent production, oil and NGL volumes were 24 percent in the second quarter of 2011, as compared to 13 percent in the prior year quarter and 20 percent in the first quarter of 2011. Total product revenues from the sale of natural gas, crude oil and NGLs were $73.0 million, or $6.24 per thousand cubic feet of natural gas equivalent (Mcfe), in the second quarter of 2011, up 39 percent as compared to $52.3 million, or $5.00 per Mcfe, in the second quarter of 2010. Oil and NGL revenues were 48 percent of total product revenues in the second quarter of 2011, as compared to 26 percent in the prior year quarter and 39 percent in the first quarter of 2011.

The year-over-year production increase was due to our new Eagle Ford Shale wells and contributions from 2010 drilling in the horizontal Cotton Valley and Haynesville Shale plays. The 111 percent increase in oil and NGL production as compared to the prior year quarter was due to drilling activity in the Eagle Ford Shale and increased NGL volumes from the Granite Wash. The sequential quarterly decrease in production was attributable primarily to natural gas production declines, partially offset by higher oil and NGL volumes in the Eagle Ford Shale.

Eagle Ford Shale

During the second quarter of 2011, we drilled nine (7.5 net) operated wells in the Eagle Ford Shale, all of which were successful. We currently have three rigs drilling our 15th through 17th wells, two wells that are waiting on completion (WOC) and 12 (10.0 net) wells that are producing approximately 8,000 (5,000 net) BOEPD.

We previously announced the success of our initial six wells in the Eagle Ford Shale, which had an average peak gross production rate of 1,040 BOEPD. Our next six wells were brought on line with an average peak gross production rate of 1,169 BOEPD. As detailed in the table above, the discovery well (Gardner #1-H) has cumulative gross production (wellhead) of approximately 85,000 barrels of oil and 67 MMcf of natural gas, or approximately 96 thousand barrels of oil equivalent, after 183 days on line and is still currently producing approximately 350 BOEPD.

In July 2011, we acquired an additional 1,200 net acres in Gonzales County for approximately $4,000 per net acre, increasing our net Eagle Ford Shale leasehold position from 12,700 net acres to 13,900 net acres. Thus far in 2011, we have added 6,500 net acres in Gonzales County for approximately $24 million. We have identified up to 142 horizontal well locations on our current acreage position of approximately 17,800 gross acres. Our full-year 2011 guidance includes up to 34 (27.9 net) wells in 2011, as compared to previous guidance of up to 29 (24.4 net) wells, with up to 23 (18.7 net) wells to be drilled during the second half of 2011. We will attempt to expand our Eagle Ford Shale position in Gonzales County and other areas in the play through additional leasing and selective acquisitions.

Capital Expenditures

During the second quarter of 2011, oil and gas capital expenditures were approximately $105 million, as compared to $116 million in the second quarter of 2010 and $104 million in the first quarter of 2011, consisting of:

  • $95 million for drilling and completion activities, including 19 (12.6 net) wells, 16 (10.4 net) of which were successful, one (1.0 net) of which was unsuccessful and two (1.3 net) of which are WOC
  • $8 million for seismic, pipeline, gathering and facilities
  • $2 million for leasehold acquisitions and other

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