Pogo Plans Aggressive Capital Program in 2002
|Tuesday, January 22, 2002
Net income of Pogo Producing Company in 2001 totaled $87,954,000, or $1.72 per share, on revenues of $605,500,000, it was announced today by Paul G. Van Wagenen, Chairman and Chief Executive Officer. In 2000, Pogo recorded net income of $87,255,000, or $2.16 per share, on revenues of $497,991,000. Pogo's 2001 fourth quarter net income was $1,426,000, or $0.03 per share, on revenues of $122,709,000, compared to fourth quarter 2000 net income of $35,899,000, or $0.88 per share, on revenues of $159,971,000. Discretionary cash flow in 2001 was $377,329,000, up from $316,114,000 a year earlier. In the fourth quarter of 2001, discretionary cash flow was $67,514,000, compared to $108,145,000 in the fourth quarter a year ago. Mr. Van Wagenen said, "Our highly successful 2001 drilling program enabled us to replace our production for the tenth consecutive year, a primary annual objective of Pogo. Replacement of reserves was even more of an accomplishment considering Pogo's record-high production rates in 2001. Much of the increase came from the properties acquired from North Central Oil Corporation, as well as from Pogo's production growth in the Gulf of Thailand and the new production at the Thibodaux exploration project in southeastern Louisiana. " Mr. Van Wagenen also said, "Pogo had an unusually successful year with the drill bit in 2001. The company drilled a worldwide total of 124 gross wells, 115 of which were successfully completed, a 93% success rate. For a company with a meaningful exploration program, that record is truly extraordinary." Pogo added enough new proven oil and natural gas reserves to replace an estimated 134% of its 2001 worldwide production. New reserves discovered in Thailand in 2001 offset 115% of Thailand's production, and new reserves added in the United States reflect a 144% domestic production replacement rate. Pogo's year-end estimated equivalent proven oil and natural gas reserves rose to 1.534 trillion cubic feet. Pogo's 2001 equivalent daily production of all hydrocarbons was 71,344 barrels per day, a 28% increase from 55,733 barrels per day of equivalent production in 2000. In 2001, average daily production of liquid hydrocarbons (crude oil, condensate and plant products) was 31,707 barrels per day, up 12% from 28,298 barrels per day in 2000. Daily natural gas production in 2001 averaged 237.8 million cubic feet per day (mmcf/d), up 44% from 164.6 mmcf/d in 2000. In the fourth quarter of 2001, production of liquid hydrocarbons averaged 34,364 barrels per day, a 13% increase from 30,332 barrels per day produced in the fourth quarter of 2000. Natural gas production averaged 250.1 mmcf/d in the quarter just ended, up 56% from 160.5 mmcf/d produced in the fourth quarter of 2000. For all of 2001, natural gas prices averaged $3.71 per thousand cubic feet (mcf), compared to $3.16 per mcf averaged in 2000. Natural gas prices fell late in 2001, however, and in the fourth quarter Pogo received just $2.92 per mcf, down from $4.36 per mcf averaged in the final quarter of 2000. Average oil and condensate prices received by Pogo in 2001 dropped to $23.99 per barrel, from $28.92 per barrel in 2000. Fourth quarter 2001 oil and condensate prices fell to $18.63 per barrel, significantly below the $27.93 per barrel received in the same quarter of 2000. Early in 2002, Pogo began producing from the big Main Pass Blocks 61/62 field. The large "A" structure platform came on-stream and several wells will begin producing during the next few weeks. Elsewhere in that field, the "B" structure platform jacket was recently placed in the water. The "B" platform top-side will be set, development wells will be drilled and production will begin late this year. By year-end 2001, Pogo's two subsea-completions at the new Mississippi Canyon Blocks 661/705 field began producing. Production rates from that field are now increasing. At year end, production from the new Ewing Bank Block 871 field was still awaiting the green light from the operator of the host platform on Ewing Bank Block 873, which is expected within a couple of weeks. Pogo's challenge in 2002 will be to extend its offshore exploration success, replicating the impact of these three new offshore fields. The 12-year long Permian Basin drilling success rate of 96% continued in 2001. Of 29 Permian wells drilled, 28 of them were successfully completed during the year, and three more were drilling or testing at year-end. This year, Pogo will begin exploring its 6,000 gross-acre Kiowa prospect in Pecos County, Texas. Pogo, a two-thirds owner, will operate this new Devonian/Ellenburger exploration play, to be drilled to a depth of approximately 15,000 feet. Early drilling success could lead to several more exploration and delineation wells. Thibodaux, the company's 47%-owned and operated 60-square-mile 3-D seismic project in southeastern Louisiana, has already resulted in four good wells, and a fifth well is still drilling and has already encountered pay. The first two wells, the Morvant No. 1 and the Martinez No. 1, have begun producing. The Kearns No. 2 and Laurel Valley No. 1 are expected to begin producing soon. The fifth well, the Kearns No. 3, has logged pay and is still drilling. The sixth well, the Toups No. 1, will spud in the near future. Each successful Thibodaux well is expected to produce at a gross initial rate of approximately 5 mmcf/d. In south Texas, four rigs are running in Pogo's Los Mogotes field. Twelve such wells were successfully completed in 2001 in the Asche/Charco/Lobo pay intervals. Several of those wells tested at rates of as high as 8 to 10 mmcf/d. Pogo operates and owns 65% of Los Mogotes field, and expects to drill about 20 new wells per year for the next few years. Two large rigs are working in the deep horizons of Pogo's 11%-owned Madden field in Wyoming. At year-end, the 7-34 deep well had reached its planned total depth of almost 25,000 feet and was awaiting testing and completion. Another deep well, the 8-35, is expected to reach that depth within 60 days. Five shallower Madden wells, drilled to the lower Fort Union sands, resulted in four successful completions. Twenty-nine gross wells were drilled on Thailand license concession Block B8/32 in 2001, including two exploration wells and 16 development wells in Benchamas field, six wildcat wells in the Jarmjuree area, three exploration wells in the Chaba exploratory area, an appraisal well at the newly-producing Maliwan field, and a development well in the Tantawan field. This year, some five dozen new wells should be drilled across Block B8/32 to explore and develop current and future production areas. In Hungary, Pogo will dedicate the coming year to diligent study of 140,000 acres of new 3-D seismic data, in preparation for what is hoped will be a very active exploration program beginning early in 2003. During the fourth quarter of 2001, Pogo identified certain properties and assets that it felt were underperforming, had little or no remaining potential, or faced significant future expenditures which would likely result in a negative rate of return. The company believed these properties needed to be rationalized, including an intrastate pipeline in eastern Texas and some eight OCS lease blocks located in the Gulf of Mexico. Pogo timely sold those properties and assets to various purchasers near the end of 2001, at favorable prices. Book values of the properties and assets sold resulted in a one-time fourth quarter charge to earnings of approximately $5 million. The Board of Directors today approved a $340 million capital and exploration budget for 2002. This compares to approximately $412 million expended in 2001. This year, Pogo plans to drill 179 gross wells, including 61 in the Gulf of Thailand. Mr. Van Wagenen noted, "In 2002, Pogo is planning its most aggressive exploration and delineation drilling schedule ever, in terms of the number of wells drilled. Although we hope to drill more wells, we anticipate fewer infrastructure costs so we still expect to spend less money than last year. We will place particular drilling emphasis on our south Texas, south Louisiana and Gulf of Mexico prospects, and on the Thailand license concession. Accelerated Benchamas field production in the Gulf of Thailand is expected in the next two years, and domestic production should rise markedly in 2002 and 2003."